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 ?
Effect of currency undervaluation on growth (and other variables)
Empirical evidence suggests that the bulk of securities mispricing occurs in the direction of overvaluation rather than undervaluation.
There is a strong positive relationship across all developing countries between currency undervaluation and economic growth.
Our findings indicate that the "ROE" (return on equity) and "percentage of voting rights owned by the public" variables are the best indicators of undervaluation, depending on whether a probabilistic or a linear approach is used.
Currency undervaluation raises the domestic price of tradables relative to nontradables, which provides an offsetting boost to the tradable goods sector.
Most of the empirical results to date do not support the conclusion that exchange rate undervaluation is helpful for growth.
The latest merger and acquisition activity reflects the lure of solid cashflows, historical undervaluation and strong demand for new homes because housing supply is restricted by tight planning regulations.
Currently, seven pieces of legislation are floating around Congress that could redress the undervaluation of Chinese currency--Schumer/Graham, Stabenow, Collins/Bayh, Lieberman, Sanders, English and Ryan/Hunter.
Lockhart said undervaluation is "the biggest problem" that can lead to an E&O claim.
In his amended complaint, Hill repeated his allegations of general unfairness in the Lycoming County property reassessment, including his assertion that the value of "high-crime, blighted, ghetto property" was inflated to compensate for the loss of tax revenue from undervaluation of "exclusive, large, wealthy, estate land parcels" The trial court again dismissed his complaint.
The largest contributor to that wealth gap, according to Black Wealth, White Wealth by Melvin Oliver and Thomas Shapiro, is the undervaluation of our homes.
The waste metal industry was "particularly difficult for member states to police", said Brussels, with formal undervaluation and cash payments lowering VAT payments.