9 Best Undervalued Stocks To Buy In 2021

Investors who earn more than the market are usually those who invest in stocks that are healthy and cheap. This is a smart strategy to buy low and sell high.  Investing in undervalued stocks has been one of the most common practices to outperform the market. An undervalued stock has a lower market value than its intrinsic value, which makes it a great investment. Intrinsic value is usually calculated by identifying the stock’s cash flows, assets and liabilities. Investors can buy an undervalued stock and sell high when the market realizes its value and the price of the stock rises.

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Looking for stocks that are both cheap and stable is not difficult. As an investor, if you keep an eye on the market, with some basic research you can earn huge profits from these undervalued stocks. The few basic steps to find undervalued stocks are:

  • Lower Price Earnings Ratio (P/E)

    Price Earnings ratio is the first ratio to evaluate a stock’s value. This ratio compares the market price of a stock with the company’s earnings. For example, if the P/E ratio of a company is 15 and all the competing companies have a higher P/E ratio then this is a potential stock to watch out.

  • Lower Price Earnings Growth Ratio (PEG)

    The PEG ratio further confirms the value of a stock. Dividing the P/E ratio by the earnings growth rate gives you the PEG ratio. For example, if the PE ratio is 15 and earnings growth rate is 20% then divide 15 by 20 you will get you will get 0.75. The lower this PEG ratio the better the opportunity to invest in.

  • High Dividend Yield

    If a company’s dividend payment rate exceeds that of its competitors, this may indicate the stock is undervalued. For example, if the company’s dividend yield is 3% and the industry’s dividend yield is 2% than it is a high dividend yield and makes this company’s stock an undervalued stock.

  • Low Market to Book Ratio

    Market to Book ratio is calculated by dividing the share price of the stock with the book value. The higher the Market to Book ratio the more inflated is its market price. Hence a lower Market to book ratio means higher potential for future growth

Even though there is no guarantee of the way the financial market moves, the above ratio gave a fairly good idea about undervalued stocks to invest in. Keeping in mind these above ratios we have compiled a list of ‘Best Undervalued Stocks’ below which will guide you in the best possible way:

List of 9 Best Undervalued Stocks

Name Price Earnings Ratio Price Earnings Growth Ratio (5 year expected) Dividend Yield Market to Book Ratio
Alibaba group 24.32 44.1 NA 0.6
Bank of America 17.18 0.54 1.86% 1.38
Verizon 12.29 3.48 4.49% 3.26
Kroger 11 1.25 1.9% 3.1
Tennant 26.38 1.22 1.18% 3.4
Upland software 17 2.06 NA 3.89
Norton Lifelock 23 1.07 1.81% NA
Tyson foods 11.19 3.14 2.35% 1.68
Merck 17.33 1.17 3.17% 7.33
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Disclaimer: Futures, options, and over the counter foreign exchange products may involve substantial risk and may not be suitable for all investors. Leverage can work against you as well as for ...

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