According to the general market wisdom, a company's stock price is directly related to its fundamentals. Companies with great fundamentals are expected to trade at high valuations and those with mediocre to bad fundamentals tend to be available cheap. But there are ample exceptions to this tenet.
Look at the table below. It lists companies, all small and micro caps, which have high price-to-earnings ratios, yet their fundamentals don't seem to support their sky-high valuations. They have low profits and equity base as compared to their market capitalisations. The return on equity for many of them is also on the lower side.
Many of these have run up in the last one year, when the overall market was weak. Since they are very small companies, one can't rule out foul play. Better to stay away from them.
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