When is a stock undervalued?

An undervalued stock is a stock whose market price is lower than its estimated intrinsic value. This can happen for various reasons, such as temporary market inefficiencies, negative sentiment, or underestimation of the company's growth potential. Value investors actively seek undervalued stocks in the expectation that the market will eventually recognize the true value, leading to price increases. Identifying undervalued stocks requires thorough analysis and can involve risks if the market does not acknowledge the undervaluation.