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 ?
The second root cause of the euro's undervaluation lies within the country over which President Trump presides.
Effect of currency undervaluation on growth (and other variables)
Dikshit said the revision in circle rates would help in curbing the prevailing undervaluation of properties.
s Chinese plant in the southern province of Guangdong reflects the undervaluation of Chinese labor in the country, which has seen growth in workers' wages lagging behind the rate of economic growth, state media said Tuesday.
Deregulation of price-increasing insider trading could similarly remedy undervalued equity, but undervaluation causes fewer problems than overvaluation and there are numerous other mechanisms for addressing that sort of mispricing.
Currency undervaluation is currently the Chinese government's main instrument for subsidizing manufacturing and other tradable sectors, and therefore promoting growth through structural change.
The signalling models underline the fact that undervaluation is a strategy used by shareholders in fast-growing companies to help stand out from non-growth companies.
Fahad Sattar Dero, chief executive of Sweet Homes, also developing in Ajman, said his company is still selling units at old rates but the financial crisis has resulted in an undervaluation of properties.
And to describe Milk's death as a murder is to reduce it to its most lurid details; that is, it perpetuates the same undervaluation of Milk's life that led the perpetrator to be convicted of manslaughter.
ABSTRACT I show that undervaluation of the currency (a high real exchange rate) stimulates economic growth.
At this stage, we believe that there is little benefit for the authorities to maintain normal undervaluation in the face of rising costs to the pegged exchange rate regime," the investment bank said.
This conclusion is widely accepted, but the parallel theoretical and analytically equivalent conclusion--that exchange rate undervaluation is helpful to growth--is not.