Identifying Overvalued Stocks with Corporate Job Postings

Separating overvalued from just highly-valued stocks is a major objective of investment analysis, since, as Jensen (2004) stated, “overvalued stocks will, by definition, collapse.” Highly-valued stocks, in contrast, can persist in their elevated valuation. We claim in this study that the rate of firms’ job postings – a new metric used in investment analysis – can distinguish between overvalued and highly-valued stocks. Using a database that covers the near-universe of the online corporate job postings in the U.S., we document that the rate of firms’ job postings indeed contributes to the separation of highly- from overly-valued shares, incrementally to conventional valuation measures used by investors. Of special interest is our finding that the rate of job postings strongly separated highly- from overly-valued shares during the Covid-19 period. We substantiate our findings by establishing that the rate of job postings predicts the growth of firms’ sales and gross profit for at least three years, controlling for conventional growth predictors, such as R&D, capital expenditures, and the book-to-market ratio, hence the power of job postings to separate overvalued from the growth-driven highly-valued stocks.