Stocks go up in price for a number of reasons: a favorable news report, an entire sector rising, the appearance of undervaluation based on historical fundamental data, or trading by technical analysts based on bullish price and volume patterns.
For a stock to sustain a steep price increase, it should be expected to experience high revenue and earnings growth. But is expected growth alone enough to decide if a company represents a good valuation? Of course not. One also needs to look at the stock price to determine if it represents a strong valuation relative to the company’s expected growth.