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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.


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 ?
But Ms Moore felt she could no longer stay at the council she claimed was undermining and under-valuing her profession.
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.
Too many organisations still need to get their act together and stop under-valuing women's talent.
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.
The Forum of Private Business believes that banks are often under-valuing properties when considering them as security for business loans.
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.
We believe the market is under-valuing the story here and believe $5 per share, a market cap of $250 million, more fairly represents the company.
The under-valuing of a precious public asset cheated every one of us.
As Mr Darling was struggling to convince parliamentary critics and public alike that they had nothing to worry about with him in charge, the Newcastle-based borrower (formerly lender) was making it known that would-be buyers were seriously under-valuing it.