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 ?
Cadbury was quoting Dickens' 'Tale of Two Cities' in order to express his frustration with what he perceived to be the continued under-valuation of his company relative to the rampant hi-tech sector.
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.
Even as a fan of the author's books, I can't help feeling this populist choice is a patronising, further under-valuation of women's contribution to British history.
In a bid to eliminate tax evasion through under-valuation and under-reporting in property sale, the Budget proposes a TDS of one per cent on all transfers of immovable properties for a consideration above Rs 50 lakh.
And investor sentiment can be destabilising, extrapolating good and bad times into pronounced cycles of over and under-valuation.
China's falling current account surplus is a visible sign for correcting the renminbi's under-valuation and, hence, a trend towards equilibrium.