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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 ?
"Communities still see youth as a problem and treat kids in a controlling way." Even communities in which the resources of youth ostensibly are recognized may under-value the contributions of youth.
You have got to be conscious of that but there's no way we want to under-value how important it is when Wales play England because of the tradition and, over the years, there's very little between us with the win-loss ratio; they are a couple ahead of us.
It means that when we do take wickets, people perhaps under-value them a little bit, but the flip-side is that opposition bowlers come here expecting to take them and that often works in our favour.
The England left-back was pursued by former boss David Moyes throughout the transfer window, but the Red Devils eventually only tabled a string of under-value bids and the Blues refused to even consider selling their prized asset.
"I think a lot of people under-value their experience and some may assume that they need to be fabulously wealthy to become a 'business angel'.
But while the Blues expect an pounds 11m 'take it or leave it' bid, the Stamford Bridge hierarchy will refuse to be railroaded into what they feel is a under-value deal.
I will not take on jobs that underpay and under-value my experience and fail to cover the enormous expense of a degree course."
"We shall look at the valuations of the businesses sold to make sure there was no sale at an under-value."
If it goes the other way, and the final gap is eight points, the record books would cruelly deny Arsenal's contribution to that absorbing contest - and under-value United's achievement in wresting what Ferguson has hailed as the greatest of his eight titles.
One confided that it was "in the dark about this Directive" and was until recently hoping that a previous reference made to the electricity sector in a Communication initially written by the former Competition Commissioner, Karel Van Miert, would apply as an exemption.Under-valued assets?For a long time, the European Commission's Competition Directorate-General has been under increasing pressure from many private firms in EU countries where the governments either pour in state funds to their national champions and utilities - or under-value assets due to be sold - while disregarding an ever-increasing purse from other sources of revenue going to the same utilities.