Undervaluation

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Undervaluation

The state in which a security's price is lower than it ought to be. A stock may be undervalued, for example, when its earnings and financial outlook are both strong, but its share price is still comparatively low. A number of factors may cause undervaluation, including lack of investor knowledge about the company, which, in turn, leads to low demand for its securities. Value investors seek out undervalued companies because they tend to provide solid returns for lower prices.

Undervaluation.

Any stock that trades at a lower price than the issuing company's reputation, earnings outlook, or financial situation would seem to merit is considered undervalued.

Undervaluation may occur when investors lose interest in a company, perhaps because it hasn't kept pace with its competitors, or if there are management problems.

Some investors concentrate on identifying and investing in undervalued stocks, sometimes called simply value stocks, drawn by their bargain prices and the expectation of recovery.

References in periodicals archive ?
As Mr Darling was struggling to convince parliamentary critics and public alike that they had nothing to worry about with him in charge, the Newcastle-based borrower (formerly lender) was making it known that would-be buyers were seriously under-valuing it.
With a number of Premiership clubs ( chief among them Aston Villa, Blackburn Rovers and Tottenham Hotspur ( thought to be showing an interest in Sunderland's Young Player of the Year, agent Ian Elliott believes the Black Cats are under-valuing their academy graduate.
The union revealed examples of workplaces with high levels of job segregation and under-valuing of women's work, including a food factory where most shop floor workers were women and most managers were men; a supermarket where most checkout staff were women and the majority of managers and drivers were men, and a financial services company in the City of London where most cleaners and caterers were women and most brokers and dealers were men.
The truth is, both should take their share of the blame - Warburgs for failing to see what institutions were prepared to pay and the institutions for under-valuing a perfectly profitable little company.
The world is currently struggling with the consequences of over-valuing its financial assets, but a more fundamental crisis looms ahead -- an ecological credit crunch caused by under-valuing the environmental assets that are the basis of all life and prosperity," said WWF International Director-General James Leape, in the foreword to the new report.
It is an ideological, dogmatic privatisation by this Government, made even worse by under-valuing Royal Mail.
Farmers claimed the table system, based on average market prices, would have slashed compensation payments by up to 35% by under-valuing pedigree animals.
Labour) are under-valuing the work of community support officers, police, neighbourhood wardens and council staff, all of whom are saying they're working together better than ever before getting to grips with the issues and making Newcastle a safer place.
They were guilty of under-valuing the Welsh Assembly
Smith has authored a white paper called "Getting It Right: Property Insurance Values" in which he highlights the dangers to insurers as well as customers of under-valuing property and business interruption risks.
The Supreme Court, which is hearing various cases related to the 2G scam, had come down heavily on the CBI recently, asking why it had not questioned Raja even though the report by the Comptroller and Auditor General (CAG) faulted him for under-valuing the 2G spectrum.