With the rally on Thai stock exchanges following the military's seizure of power on May 22, nearly one-third of listed companies are potentially overstretched.
Based on the Stock Exchange of Thailand's price-to-earnings (P/E) ratio of 8.43 times as of Monday, 186 stocks were trading above the benchmark and 187 below, according to SET data.
P/E information was unavailable for 121 of the 494 companies listed on the SET.
Galvanised iron sheet maker Thailand Iron Works (TIW) stood atop the stretched valuation charts. Its P/E was 841.97 times as of Monday.
Everland (EVER), a property developer, had the second highest P/E at 476.15 times, followed by peer Major Development (MJD) at 445.36, investment and leasing firm Premier Enterprise (PE) at 414 and developer Areeya (A) at 364.54.
On the Market for Alternative Investment (MAI), which had a P/E of 78.96 times on Monday, 12 stocks had a greater ratio and 65 were lower.
Of the MAI's 105 listings, P/E was unavailable for 28 stocks.
Montree: Bubble not yet popped
The top five were Mangpong 1989 (MPG) at 271.37 times, Nation International (NINE) at 254.18, LDC Dental (LDC) at 241.02, Chuo Senko (CHUO) at 211.41 and Asia Joint Panorama (AJP) at 137.7.
The SET index has surged 22.5% so far this year, while the MAI has almost doubled.
Unease over red-hot stocks, small and medium-cap stocks in particular, is mounting.
Even the SET has voiced concern about overheating in such stocks, but regulators are loath to impose additional measures for fear that tougher measures could hurt market sentiment. Current measures include notices, trade alerts, cash balance requirements and suspensions.
"Investors must be selective if they want to jump into buying high-P/E shares. Actually, quite a few stocks with high P/E don't do much, but they've caught attention," said SET president Kesara Manchusree.
Market P/E is calculated based on the historical operating results of the latest four quarters, so a more accurate figure would be based on future earnings.
"Investors must think carefully about whether companies have the real capability to generate performance in line with market prices," Mrs Kesara said.
If one considers a P/E above 50 times as a criterion for putting stocks in cash balance account, 39 SET-listed stocks (8%) and 21 MAI names (20%) make the cut.
Therdsak Taweethiratham, a senior vice-president of Asia Plus Securities, said the number of high P/E stocks signalled that markets were at risk of correction and investors should therefore trade based on positive-moving news and hold more cash.
"When prices are expensive, we should buy them less," he said.
"The current market price is trading based on next year's fair value. If investors put 100 baht into the stock market, they should reduce to only 30 baht."
Meanwhile, Montree Sornpaisarn, chief executive of Maybank Kim Eng Securities, said the bubble in the Thai stock market had not popped yet, as witnessed by low margin loans.
"Prices of some shares may surge, so investors should tread prudently," he said. "Whether there is a bubble in the market, I judge from margin loans that are fairly low at the moment at 50-55 billion baht compared with the total market cap of 14 billion."
His brokerage house has set its SET index target for next year at 1,650 points.
The stock market's euphoria will remain for the next six months on better exports, tourism and domestic consumption, Mr Montree added.