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Finding stocks

How to find undervalued stocks

An undervalued stock trades below what the business is likely worth. Low price ratios find candidates; a valuation model, the company's history and its peers tell you whether it is cheap or cheap for a reason.

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Start with price ratios

The P/E (price to earnings), P/B (price to book value) and price to free cash flow compare the share price with what the company earns or owns. Lower is cheaper - but only within an industry, and only if the earnings are real and likely to last.

Estimate what it is worth

A discounted cash flow (DCF) model adds up the cash the company is expected to earn in the future, worth less the further away it is. Ticker Picker's estimated return is our model's yearly return from today's price to that value. It is an estimate built on assumptions, not a promise.

Avoid value traps

Some shares are cheap because sales are shrinking, debt is too high or the industry is in decline. Check several years of revenue and profit, the debt and the news. A cheap share with improving numbers is far more interesting than a cheap share whose numbers keep falling.

Using the screener

The Value profile shows profitable companies worth at least 2 billion with a P/E between 0 and 15, ranked by our model's estimated 10-year return.

Try it in the screener

The Value profile shows profitable companies that look cheap. It is a learning example, not a recommendation.

Show value stocks

This content is general information, not investment advice.