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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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
* It was also ready and willing to open its own market, and the markets of its allies, to guarantee the Asian economies a market for their products, as well as deliberately engineer the under-valuation of the Asian currencies to encourage Asian exports and discourage imports into the targeted Asian countries, thus opening the space for an import-substitution industrial strategy.
Born of the sustained assault on profitability by pharmacy benefits management companies (PBMs) and, increasingly, federal and state governments, as well as the general under-valuation of pharmacy care, prescription drug providers that operate in a chain setting have come to the realization that if they don't play a more active role in determining their place in the health care system of the 21st century, it will be determined for them.
Despite the risks, some economists present the case for buying into selective EM funds, because of the under-valuation of most markets.
This often results in an under-valuation of assets reported in financial statements for U.S.
The oppression that women experience each day, the under-valuation of women, discrimination against them and their subordination to the service of others, as well as the impact of direct or structural violence must not be silenced by exclusive attention to "the symptom."
However, I believe that the editors' focus on the question of whether European unions have followed traditional or innovative strategies results in some under-valuation of the authors' contributions.
Another nasty trick exposed by the Office of Fair Trading is the deliberate under-valuation of a house.
That under-valuation was partly Hoch's own fault, since, as older Dada afficionados know, she was very reluctant in the closing years of her life to talk about its colourful earlier years, and almost totally unwilling to allow researchers to see her books and papers.
Early in 1990, Treasury Department personnel recommended the incomplete transfer rules of IRC section 2036(c) be replaced by legislation preventing abusive under-valuation of common stock given or sold by a transferor in an estate freeze transaction.
The most willing merger targets will be the state's publicly owned thrifts, whose shareholders stand to gain the most from their under-valuation in the stock market.
It says that the great mistake of Western culture, through most of its history, has been the under-valuation of this femininity.
The FBR's three directorates of post-clearance audit and as many directorates of internal audit are theoretically a great fear and force against mis-declaration, under-valuation and under-assessment of imported goods as the detection of these irregularities in the post-clearance audit is a threat looming on importers and clearing agents.