How do you identify an undervalued stock? PE? EPS? Book Value?

2 Answers 2


You can't. If there was a reliable way to identify an undervalued stock, then people would immediately buy it, its price would rise and it wouldn't be undervalued any more.

  • 1
    This is an overly simplistic answer. I would have expected to see at least some best-effort or examples of other approximate ways to do this. After all, this is done all day long by investors all over the globe, so...
    – not2qubit
    May 23, 2019 at 11:22

P/E = price per earnings. low P/E (P/E < 4) means stock is undervalued. enter image description here

  • What about a negative P/E? Not sure the stock is undervalued in that case yet Mathematically, the P/E would be low.
    – JB King
    Sep 5, 2015 at 15:13
  • What about Book value and Cash holding per share? Would that matter?
    – letterhead
    Sep 5, 2015 at 15:17
  • of course i meant P/E > 0. I am a noob myself, not an expert. But the more metrics you factor in, how do you combine all of them into a single number? So I preferred to give a simple answer.
    – Steve
    Sep 5, 2015 at 15:20
  • also see wikipedia Either the stock is undervalued, or the company's earnings are thought to be in decline
    – Steve
    Oct 7, 2015 at 2:11

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