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.

BREAKING DOWN '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.

  1. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Fire Sale

    Selling goods or assets at heavily discounted prices. Fire sale ...
  3. Value Stock

    A stock that tends to trade at a lower price relative to it's ...
  4. Intrinsic Value

    Intrinsic value is the actual value of a company or an asset ...
  5. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  6. In The Penalty Box

    A phrase referring to a company whose stock has plummeted with ...
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