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 ?
Therefore, if you consider that the transaction may be at an undervalue, our advice would be to obtain insurance.
"But if some choose to deliberately undervalue their homes, in a bid to pay less property tax, this recovery will be undermined."
The company's board stated that in the interests of all its stakeholders, it has come to a unanimous conclusion that the proposal also undervalues its future prospects of becoming a completely integrated biopharmaceutical company.
"ZPG's proposal is highly opportunistic and fundamentally undervalues the company and its prospects."
But Hornby said the offer, made at 32.375p per share, "significantly undervalues" it and its future prospects.
Because the PBOC undervalues its currency, the subsequent demand for renminbi arising from China's exports and inward investment exceeds the supply of renminbi resulting from China's imports and outward investments.
"BRK's offer is unwelcome, highly opportunistic and at just 90p per share, fundamentally undervalues the company.
The bid a[euro]oedramatically undervalues Icagena[euro](tm)s assetsa[euro] and does not serve the best interest of its shareholders, Merlin Nexus and NLV Partners said in a joint letter to Icagena[euro](tm)s board.
Simon Reed, vice-chairman of the organisation, said it was clear the Home Secretary undervalues the work of the police, despite her claims to the contrary.
BAA, facing a potential hostile takeover as well as a possible government inquiry into whether its control of seven UK airports creates a fair market for airlines and passengers, is pushing back and warning shareholders that Ferrovial Group's [pounds sterling]8.75 billion ($16.41 billion) bid greatly undervalues the company.
WILLIAM Hill has rejected a takeover offer from Rank Group and 888, saying that the duo's proposal for a PS3.6 billion three-way merger "substantially undervalues" the high street bookmaker.
Chairman David Pritchard said: "This proposal significantly undervalues Songbird and does not reflect the inherent value of the business and its underlying assets.