Investment in Undervalued Shares

Are you a trader ?Are you interested in long term trading?If yes, then pick up undervalued shares and book profit in future.

 Undervalued Share – When the price of the share is less than it’s intrinsic value then it is said to be undervalued.We can determine the undervalued share from the following things

  • The company’s PE ratio is good

  • The company’s earning history is stable.

  • The company is not in the middle of some financial scandal.

  • The company’s low PE ratio is not due to profits from capital gain or due to major decline in profitability etc.

If we think in a very simple way then the share of a good company is said to be under valued when it is at a price which is lower  than the face value of the share because the price of a good company’s share always increases where as the share of a financially weak company is  said to be over valued even when  it’s share price is lower than the face value because this company can become insolvent at any time in the future.

 

We can earn a good return from the undervalued share if we shall become able to identify an under valued share very smartly.