Undervalue?

kitiya · 1 Undervalue? Sat Aug 27, 2011 10:31 pm

kitiya

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How to decide a sotck is undervalued?

uanuradha · 2 Re: Undervalue? Sun Aug 28, 2011 12:36 am

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PEG under 1

sriranga · 3 Under Value Stocks Sun Aug 28, 2011 4:17 am

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I found the below explanation from Wikipedia, may be that will help us to understand the under value shares.

"Some qualities of companies with undervalued stocks are:
1. The company's earning history is stable.
2. The company does not specialize in high-technology that can become obsolete overnight.
3. The company is not in the middle of some financial scandal.
4. The company's low PE ratio is not due to profits realized from capital gains.
5. The company's low PE ratio is not due to a major decline in profitability.
6. The company's PE ratio is below its average PE ratio for the last 10 years.
7. The company is selling at a price below its tangible asset value.
8. The company's trailing 3-years earnings has risen over the past 10 years.
9. The company's credit rating is AAA, AA, or A, or even better, there is no rating because there is no debt at all.
10. The company did not have a loss during the last recession.

An excellent stock at a fair price is more likely to be undervalued than is a poor stock at a low price, according to Charles Munger, the Harvard-educated partner of Buffett. An excellent stock continues to rise in value over the long term, while a poor stock declines in value. An undervalued stock will usually have a low PE ratio. For example, a PE ratio of 10 is much better than a PE ratio of 20."

Comments appreciated.

soileconomy · 4 Re: Undervalue? Sun Aug 28, 2011 6:18 am

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thanx-sriranga

rm · 5 Re: Undervalue? Sun Aug 28, 2011 9:59 am

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@ Sriranga,
Thanks for sharing this.

edward1978 · 6 Re: Undervalue? Sun Aug 28, 2011 10:25 am

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Usually low PER is good sign but there are exceptions also.Thanks for sharing.

a_randy · 7 Re: Undervalue? Sun Aug 28, 2011 12:15 pm

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uanuradha wrote:PEG under 1

Not really under 1. It's between 0-1. Minus represents different scenario.

thambi · 8 Re: Undervalue? Mon Aug 29, 2011 5:18 am

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undervalued bascially means less than the market value look for shares where the net asset per share is below the market prices

sas · 9 Re: Undervalue? Mon Aug 29, 2011 8:17 am

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share has two basic values,
01.Market Value
02.True Value

01.Market Value
-visible(can be seen from the order book),
-change with time(can be changed huge amount within one day)

02.True Value
-invisible(not mentioned in anywhere-have to dig financial statements,using different types of formulas,complex),
-also change with time(but normally no significant difference within short time),
-this is the maximum value(in rupees)you'll get if the company faced bankrupt.

Ex:you bought a share with price at Rs.50(market value),lets say its true value is Rs.60, then you have bought an undervalued share, so if the company bankrupts you still gets Rs.60 per share.

Important:
Normally there is a saying that 'buy' when undervalued & 'sell' when overvalued, but this is theoretical, practically we can see situations like,
you buy undervalued share hoping it will go up - but it doesn't,
you buy an overvalued share - it may keep on increasing its price (but should stop at some point know Very Happy

)

-I got this information from SEC advisors-Kandy Branch-

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Latest topics

Undervalue?

1 Undervalue? Sat Aug 27, 2011 10:31 pm

kitiya

2 Re: Undervalue? Sun Aug 28, 2011 12:36 am

uanuradha

3 Under Value Stocks Sun Aug 28, 2011 4:17 am

sriranga

4 Re: Undervalue? Sun Aug 28, 2011 6:18 am

soileconomy

5 Re: Undervalue? Sun Aug 28, 2011 9:59 am

rm

6 Re: Undervalue? Sun Aug 28, 2011 10:25 am

edward1978

7 Re: Undervalue? Sun Aug 28, 2011 12:15 pm

a_randy

8 Re: Undervalue? Mon Aug 29, 2011 5:18 am

thambi

9 Re: Undervalue? Mon Aug 29, 2011 8:17 am

sas