Undervalued

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DEFINITION of 'Undervalued'

A financial security or other type of investment that is selling for a price presumed to be below the investment's true intrinsic value. A undervalued stock can be evaluated by looking at the underlying company's financial statements and analyzing its fundamentals, such as cash flow, return on assets, profit retention and capital management, to determine said stock's intrinsic value.

INVESTOPEDIA EXPLAINS 'Undervalued'

Buying stocks when they are undervalued is a key component of mogul Warren Buffett's value investing strategy. Value investing is not foolproof, however. There is no guarantee as to when or whether a stock that appears undervalued will appreciate. There is also no single correct way to determine a stock's intrinsic value - it is basically an educated guessing game.

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