Value Stock

Value Stocks

Stocks with prices lower than their intrinsic value. One may identify value stocks in a variety of ways, but two of the most popular are finding companies with low P/E ratios or low price-to-book ratios. In both cases, the stock price for a company is lower than its earnings per share or its asset value per share. These companies are thought to have high profit potential because it is thought that the share price will eventually rise to match the company's real value. See also: Buy and hold, Warren Buffett, Benjamin Graham.

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Value stock. Value stocks, also known as undervalued stocks, trade at a lower price than the company's reputation, earnings outlook, or financial situation would seem to merit.

Investors who seek them out expect the company's fortunes to turn around, and the price of the stock to increase accordingly.

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Value Stock

What Does Value Stock Mean?

A stock that trades at a lower price relative to its fundamentals (dividends, earnings, sales, etc.); value stocks are considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, a low price-to-book ratio, and/or a low price-toearnings ratio.

Investopedia explains Value Stock

A value investor believes that the stock market is often inefficient and that it is possible to find companies trading for less than what they actually may be worth. One popular way to identify value stocks is to check the “Dogs of the Dow” investing strategy: buying one of the 10 highest dividend-yielding stocks on the Dow Jones at the beginning of each year and adjusting it every year thereafter.

Related Terms:
• Earnings
• Growth Stock
• Price-to-Book Ratio—P/B Ratio
• Style
• Value Investing