Earnings season is in full swing but as the summer season closes out, the usual lull in market activity is expected. However, that doesn’t mean you should let yourself fall into complacency when it comes to managing your portfolio. If you haven’t already, take a look at Forbes’ initial coverage on value stocks. In this article, we’ll break down how to define an undervalued stock, how to find one in a sea of possibilities, and then give a few examples for readers. Let’s dive in!
What Are Undervalued Stocks?
Defining whether a stock is undervalued or not is easier than you might think. A stock can be considered undervalued when its determined price is higher than the agreed-upon price. In practice, the “determined” price is the calculated intrinsic value of the stock (we’ll get into how to calculate this in a moment) and the “agreed-upon” price is the market price or what the public set of investors is willing to pay for the stock in the open market. Of course, there are mitigating factors that determine whether a given definition successfully encapsulates what “undervalued” means, but pragmatically, this definition should be sufficient for most investors.
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