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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 ?
But Ms Moore felt she could no longer stay at the council she claimed was undermining and under-valuing her profession.
It involves an over-valuing of the other, which is tantamount to a negation of the intended partner through self-projection, and an under-valuing or negation of one's self.
of Because there is no up-front charge, people may also be under-valuing their current account and the potential for how much better off they could be if they moved to a deal which better suited their needs.
"With thousands of vacant nursing posts and surging patient demand, the NHS simply cannot afford to keep under-valuing its nursing staff, forcing thousands to go abroad.
Professor David Pickernell, director of the Centre for Enterprise at the University of South Wales, warned that women entrepreneurs often fall into the trap of under-valuing their activities and consequently underpricing their goods or services, which risks them getting stuck in a spiral of low income and low growth.
The apex court, which is hearing various cases related to the 2G scam, had come down heavily on the CBI recently, asking why it had not questioned Raja even though the report by the Comptroller and Auditor General (CAG) faulted him for under-valuing the 2G spectrum.
But full-back Arbeloa, who made the same switch from Merseyside to the Bernabeu this summer, insists Benitez got it badly wrong by under-valuing Spain international Alonso.
The situation has been that bidding originally started at pounds 1m, which was grossly under-valuing him.
"The situation has been that bidding originally started at pounds 1m which was grossly under-valuing him.
But Mr Howell said: 'There is still this feeling that it is over-emphasising academic routes and under-valuing vocational routes which are exactly the right routes for some young people.
Realising that maybe they've been under-valuing Piglet's contribution to their lives, Pooh and chums look back on all the little porker's unsung heroics in their adventures.
"They are under-valuing people and depriving themselves of the advantages they can bring."