Editor's Note: This column by Ron Thomas is a special bonus for TheStreet.com and RealMoney readers. It appeared on Street Insight on March 27. To sign up for Street Insight , where you can read Thomas' commentary in real time, please click here .Tiffany's ( TIF) faces challenges on a number of fronts, but one area in particular bears close watching on its earnings call Tuesday morning: Japan, which accounts for 22% of the company's sales. In fact, unless something momentous happens to its Japanese sales in the next year or two, I believe Tiffany's stock is overvalued. It's possible that this is not captured in sell-side consensus numbers, which are generally optimistic to begin with. I'm basing my view on a three-stage earnings discount model, with a 6% risk discount (as I do for most retailers) and a 3% terminal growth rate in EPS. At $39, Tiffany stock assumes five-year earnings growth of 16% from a base level of $1.81 for fiscal 2007, which ends in January 2007. I consider fiscal 2007 earnings to be normal for the middle of the economic cycle. So knowing nothing else about the company, you could plug in consensus EPS and a 12% long-term growth rate and get a fair value of $34. This would make you fairly certain that Tiffany shares are at least 15% overvalued, even before you did your homework. After some analysis I identified key catalysts that could make the stock fall. For starters, the stock was up over 25% to the $42 to $43 area after positive talk in August by management about Japanese business. But management also reduced the comp guidance for the year from low single digits to flat, and it said it was still too early to predict a full turnaround. Japan accounts for 22% of sales, and the brand is in some trouble because of rising competition. In addition, the diamond solitaire engagement rings Tiffany has sold for years in Japan are going out of style there, so Japanese sales will soon have to accelerate rapidly to justify the stretched valuation. The U.S. accounts for half of Tiffany's sales, and 30% of those sales are for silver items. Silver has the highest gross margins of all Tiffany's products, so I'll assume that this 15% chunk of Tiffany's sales contributes 20% of overall earnings. Although silver products are highly profitable, the average price point is under $200. So I think it's reasonable to assume that lower-income households account for a sizable portion of demand. Silver is up 50% or so from last year, and gold is up substantially, too. Because Tiffany's costs are up, I believe price increases on these items will be announced soon, and this will hurt sales. Incomes for the bottom two-thirds of Americans have not grown as fast as metals prices, so something has to give. I'm watching this as a potential catalyst.