Undervalued

The term 'undervalued' is used in the finance world in conjunction with stocks of a company. Using a particular value model, the price of the stock in question is undervalued when it is thought to be too low.

An example of when the stock price would be undervalued is when a companies price-earnings ratio is lower than the average price-earnings ratio of the particular industry the company is in.

When determining if a companies stock price is undervalued or not, a model of valuation (as mentioned above) is always used. One can not just assume that the price is valued properly.