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A stock trading below its true worth, offering long-term profit potential when bought at a lower price than its intrinsic value after research.
An undervalued stock is a stock with a lower market price /value compared to its true worth.
A stock is said to be undervalued, when it is priced much below its potential. The undervalued stocks are believed to give assured profits, but it may take time to show their real value. Thus, only long term investors invest in undervalued stocks after extensive research and analysis.
For example: When the estimated valuation of ABC shares is believed to be Rs 1500 per share, but the stock is trading at Rs 950 per share, then such shares are said to be undervalued.
There are various reasons and factors that can lead to undervaluation. One of the major causes of undervaluation is an overall downward market trend.
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