It is based on the valuation model. I use a valuation model to determine intrinsic value and expected return from a stock. the model is also used to determine confidence interval around base case valuation. Higher bound of this interval is determined using optimistic set of projections and lower bound is determined by using pessimistic set of projections while calculating value. When stock price crosses higher bound, it is too expensive and when it falls below the lower bound it is too cheap. What’s optimistic and what’s pessimistic can vary from investor to investor so this exercise can be very subjective.
Intrinsic value is is revised every quarter however one quarter does not make a huge difference even if results are bad (or good) as intrinsic value is based on medium to long term projections. If company performs well, intrinsic value should rise over time so even if stock price goes up, it may not cross upper bound.
Intrinsic value is also impacted by general risk premium for equities as an asset class and riskiness of the company relative to market. Both these parameters are cyclical. Stocks can go from risky to safe (or vice versa) in less than a year. Risk premium is determined by subtracting risk free rate from expected return on the whole market while riskiness of a company relative to market is determined by calculating beta. Details are here.