The stock market isn't being ascribed the correct valuation, ConvergEx Group Chief Market Strategist Nicholas Colas said Tuesday.
"We all hear $110 a share, and that seems like a very comfortable target, multiplied by 15, 16, 17, hit a price target, that's cool," he said. "However, what was that number 18 months ago? It was $118. What was it a year ago? It was $115. What was it the beginning of the year? It was $112.
"So, the answer is not $110. We know it's going to be $108, maybe $107. And I'm pretty uncomfortable paying 16, 17 times earnings for numbers that are coming down. I want to pay for numbers that are going up. That's not happening here."
On CNBC's "Fast Money," Colas said that stocks might be overextended.
(Read more: 3 stocks better than IBM: Pro)
"Earnings are coming in, and P/E is going to expand to a point, but not much further," he added. "I think we're near that inflection point."
Asked what a correct multiple would be, Colas said around 15 or 16 was "a very comfortable band," based on historical valuations.
"Much past that, you're talking about improving fundamentals, better revenue growth," he added. "We're not getting any of that."
(Read more: 'Most powerful bull market since WWII': Pro)
Colas also noted the large inflows into the highly liquid SPY over the past six weeks -- $15 billion of the $35 billion that has moved into stock exchange-traded funds so far in the third quarter.
"It's really hot, fast money in the U.S. market currently," he said. "So, I worry that as we do see that growth, money begins to spread out and it begins to look for opportunities elsewhere."