▁out look ▁for ▁the ▁security ▁based ▁on ▁either ▁fundamental ▁or ▁technical ▁analysis ▁techniques , ▁including ▁P / E , ▁M / B ▁etc . ▁ ▁Assuming ▁that ▁the ▁C AP M ▁is ▁correct , ▁an ▁asset ▁is ▁correctly ▁pr iced ▁when ▁its ▁estimated ▁price ▁is ▁the ▁same ▁as ▁the ▁present ▁value ▁of ▁future ▁c ash ▁flows ▁of ▁the ▁asset , ▁disc ount ed ▁at ▁the ▁rate ▁suggested ▁by ▁C AP M . ▁If ▁the ▁estimated ▁price ▁is ▁higher ▁than ▁the ▁C AP M ▁valu ation , ▁then ▁the ▁asset ▁is ▁under valu ed ▁( and ▁over valu ed ▁when ▁the ▁estimated ▁price ▁is ▁below ▁the ▁C AP M ▁valu ation ). ▁When ▁the ▁asset ▁does ▁not ▁lie ▁on ▁the ▁S ML , ▁this ▁could ▁also ▁suggest ▁mis - pr icing . ▁Since ▁the ▁expected ▁return ▁of ▁the ▁asset ▁at ▁time ▁ ▁is ▁, ▁a ▁higher ▁expected ▁return ▁than ▁what ▁C AP M ▁suggests ▁indicates ▁that ▁ ▁is ▁too ▁low ▁( the ▁asset ▁is ▁currently ▁under valu ed ), ▁assuming ▁that ▁at ▁time ▁ ▁the ▁asset ▁returns ▁to ▁the ▁C AP M ▁suggested ▁price . ▁ ▁The ▁asset ▁price ▁ ▁using ▁C AP M , ▁sometimes ▁called ▁the ▁certain ty ▁equivalent ▁pr icing ▁formula , ▁is ▁a ▁linear ▁relationship ▁given ▁by ▁ ▁where ▁ ▁is ▁the ▁pay off ▁of ▁the ▁asset ▁or ▁port folio . ▁ ▁As set - specific ▁required ▁return ▁The ▁C AP M ▁returns ▁the ▁asset - app ropri ate ▁required ▁return ▁or ▁disc ount ▁rate — i . e .