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 ?
Gareth Davis, chairman of William Hill, said: "This conditional proposal substantially undervalues William Hill, is highly opportunistic and does not reflect the inherent value of the business."
In terms of the rejection of the offer, we do think the offer undervalues the company, but we wouldn't say it significantly undervalues the company.
Gareth Davis, chairman of William Hill, said: "This revised proposal continues to substantially undervalue the company and the cash element of the proposal has not changed.
But SABMiller said the PS42.15 a share offer "still very substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects".
"The approach is unsolicited, wholly opportunistic and significantly undervalues the group's businesses," he said.
My husband undervalues my feelings by always taking sides with our son and daughter, saying they're at school and college so they shouldn't have to do regular chores at home.
MEG Energy announced its board of directors has unanimously determined that Husky Energy's unsolicited bid to acquire MEG significantly undervalues the common shares of MEG and is not in the best interests of MEG or the holders of common shares.
The board has concluded that the proposal undervalues HMV Group.
Byrd believes Atmos' 5% discount to the gas utility group undervalues its "best-in-class" growth outlook and attractive regulatory environment, he tells investors.
Chairman John von Spreckelsen said: ``This latest approach substantially undervalues our business.
His valuation analysis suggests the current 1075p offer from 21st Century Fox (FOXA) "materially undervalues" Sky and even Comcast's (CMCSA) indicative offer at 1250p "fractionally undervalues" it, Peddy tells investors.