Undervalued stock

From Wikipedia, the free encyclopedia

An undervalued stock is a stock that is believed by an investor or potential investor to be selling at a price below what it is worth. For example, if a stock is selling for $50, but it is believed by the investor by one or more measures to be worth $100, then it is an undervalued stock.

Numerous books have been written that give theories on how to determine if a stock is undervalued. Examples are The Intelligent Investor by Benjamin Graham, and The Warren Buffett Way by Robert Hagstrom.

The famous investor Warren Buffett stated that the value of a business is the sum of the cash flows over the life of the business discounted at an appropriate interest rate.[1] Therefore, one would not be able to predict whether a stock is undervalued without predicting the future profits of a company and future interest rates.

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