Countdown Test

00days 00hours 00minutes 00seconds 2020-12-25 12:00 AM     00days 00hours 00minutes 00seconds 2020-10-25 12:00…

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Stocks that trade below their fair market value are known as undervalued stocks. Undervalued stocks are typically a great purchasing opportunity because their value often increases quickly presenting investors with the ability to turn a profit. For this reason, undervalued stocks are usually considered a good investment for stock market traders.

What are Undervalued Stocks?

To reiterate, an undervalued stock is a stock that has a market price that is well below its fair value. This low market price is typically caused by either consensus estimates or a lack of investor confidence. Often times, financial analysts will either use a company’s growth rate or the price-to-earnings ratio to determine if a stock is priced below its fair value or undervalued.

The main idea behind investing in undervalued stocks, or value investing, is that the market occasionally misprices a stock. The cause of this misprice can be a number of things; however, the following are the most common:

  • Results that do not meet expectations
  • Market crashes or changes
  • Negative news about a company or stock
  • Cyclical changes

Regardless of the cause, a stock is potentially undervalued if the firm’s fundamentals and the financial analysts’ consensus estimates point toward a market price below its fair value.

It is important to note that not all investors see eye to eye on undervalued stocks. While one investor may determine a specific stock to be an undervalued stock, another investor may disagree and determine that the stock is not priced below its fair value. Even if both investors use the same methods and tools to determine the value of the stock, the final conclusion is still swayed by individual factors that vary from investor to investor.

What Happens to Undervalued Stocks?

It is possible for an undervalued stock to stay consistently undervalued for many years. When this happens, the stock is labeled a value trap and the investor will most likely try to exit the stock.

While it is possible for the stock to become a value trap, the most likely outcome is that the market will become aware of its undervalued stock. This will lead to more purchases from new investors which will drive the market price up. As the stock’s value increases, it will draw further attention from investors who might choose to invest for other reasons. Eventually, the market price of the stock will be equal to or greater than its fair value. Once this occurs, the investors who purchased the stock when it was undervalued may choose to sell the stock for a profit.

Another possibility for undervalued stock is a complete sale of the company to a competitor or a new business in the given industry. Acquisitions like this are purchased at a premium to the market price; however, investors will sometimes hold on to the stock in the hopes that the company’s shareholders will fight for a larger offer. If the shareholders push and win a better offer, the investors of the undervalued stock gain a larger profit than if they had accepted the original offer; however, regardless of the route the acquisition goes, a profit is gained.

How to Identify Undervalued Stock

When looking for undervalued stock, there are five key indicators that investors look for:

  • A low price-to-earnings (P/E) ratio
  • A lower price compared to other industry competitors
  • A low price-to-earnings growth (PEG) ratio
  • A high dividend yield
  • A low market-to-book ratio

Although it is not always the best method, the price-to-earnings ratio is the most widely used method to determine a stock’s relative value. Every company has a price-to-earnings ratio that indicates the price of the stock in relation to its earnings or profit. To calculate the price-to-earnings ratio, you divide the current stock price by its yearly earnings. If the price-to-earnings ratio is high, then the stock is likely priced high compared to its earnings. A lower price-to-earnings ratio could be an indicator of an undervalued stock, but this is not a reliable method to be used on its own as there could be many reasons for a low price-to-earnings ratio.

A stock price that is lower than that of its industry competitors could be a sign of low performance. If financial analysts deem a stock as a poor investment, then it is possible that investors will heed their advice and exit the stock. Eventually, the repeated sell offs of the stock will cause the price to decrease so significantly that it will become undervalued. When using this method to identify an undervalued stock, you should be sure to compare the histories of the stock price over several years with other stock prices as well as with stock indexes.

A more accurate way to evaluate a company’s price-to-earnings is by using the price-to-earnings growth ratio. To do this, you take the price-to-earnings ratio and divide it by the earnings growth rate over the next five years. For example, say the price-to-earnings ratio is 10 with a projected growth rate of 20%. The price-to-earnings growth ratio would be .50. A ratio below 1 suggests that investors are valuing past performance above potential future performance. While this can be a sign of a worthwhile investment, it is important to remember that growth projections are not set in stone and are not always accurate.

Another financial aspect to look at is the company’s dividend yield. A dividend payment rate that exceeds industry competitors might be a sign of an undervalued stock. A company that does not show any signs of financial hardship and seems to have a solid projection for future dividends could be a good stock investment opportunity. Investors will be set to receive decent dividends and provided the company continues to send out good returns, the stock’s market price might also increase. When looking at dividend yields, you should always make sure that the dividend has been either consistent or climbing over at least five years.

Investors can also look at the price-to-book ratio when searching for undervalued stocks. This ratio allows investors to determine a company’s margin of safety. A company will usually have both tangible and intangible assets. The value of a stock does not always reflect all of a company’s assets. The price-to-book ratio helps the investor evaluate the company’s stocks’ current market price in relation to his book value. A company with a price-to-book ratio less than 1 is considered to have a sizable margin of safety and therefore, points toward a possible undervalued stock situation.

While there is no one metric or calculation that can guarantee that a stock is undervalued, when these combined metrics point toward a lower-than-fair market price, there’s a possibility that you have identified an undervalued stock.

Five Current Examples of Undervalued Stocks

As previously noted, a company that has an increase in earnings is typically a smart investment due to the promise of a steady profit return. Based on the calculations of a discounted cash flow calculator, the following companies have displayed a steady growth in their earnings per share over the last five years:

  • IPG Photonics Corp.
  • Alliance Data Systems Corp.
  • Robert Half International Inc.
  • PVH Corp.
  • Unum Group.

All of these companies listed are undervalued companies that have demonstrated a steady earnings per share growth rate. Based on the proper calculations, IPG Photonics has an earnings per share growth of 19.30% per year while Alliance Data Systems has an earnings per share growth of 18.20% per year. Both are currently undervalued at $123 per share.

Robert Half International has an earnings per share growth of 10.30% per year and its stock is currently undervalued at $53.89 per share. PVH has an earnings per share growth of 30.60% per year, an undervalued stock price of $76 per share, and a 60% margin of safety. Lastly, Unum Group has an earning per share growth rate of 5.10% per year and its stock is listed at $25.42 per share, 14.38% below its fair market value.

Get Started Investing in Undervalued Stocks

Although there are many methods and tools that can be used to run the metrics and measurements needed in searching for undervalued stocks, none of them can offer you a guaranteed profit. To increase your chances of accurately identifying and gaining from an undervalued stock, take advantage of the experienced team at RagingBull.

At RagingBull, you’ll find helpful information that can guide you as you seek to identify undervalued stock and make a profit on your investments. Their site offers free resources for you to study as well as a personalized free training session with one of their expert investors.

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Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

So far the market is still hot… but you know what’s hotter?

Penny Stocks.

Specifically the gap fill. If you don’t know what that is, you should.

It’s a common pattern in all stocks, so you can use it in any type of trading and right now in penny stocks, it’s on fire.

 

 

 

The chart above is an example of a gap fill. Just look at that potential… that’s double your money potential right there. Needless to say, it will benefit you greatly to understand this setup…

And I am going to show you in detail how I trade it to bring in massive profits for me and my members.

 

 

Trading the Gap

 

A gap happens when a stock opens lower than the low or higher than the high from the previous day, creating space between the bars on the chart.

A gap fill is when the price of the stock trades back through the gap closing the space on the chart.

Often when a gap forms, it’s like a void without any specific support or resistance. So when a stock can break into it, there is potential to trade through it.

Take a look at some real trades using this theory.

Pareteum Corp. (TEUM)


After gapping down in late October, TEUM consolidated for the next couple months creating a good base for a breakout.

Last week my custom scanner picked it up as it broke above resistance and into the gap. Why did I like this specific trade?

The consolidation breakout is one of my favorite chart patterns and TEUM set up nicely. Next, we have space in the gap.

Once the stock breaks into the gap what’s our next resistance level?

It’s the other end of the gap. And looking at the chart you can see there was room for a 50% move in there.

So when I saw this happening with volume taking off as it broke out, I jumped in and you can see what happened.

 

 

 

 

And I’m not alone when I trade, my members are right there with me:

 

Jan 6, 12:30 PM

olavo mic: in TEUM .533 out 0.60 +$650 thanks jeff

 

Jan 6, 12:29 PM

eric roc: Holy crap Jef!!! +600 on TEUM wow!!!!

 

Jan 6, 12:27 PM

freshy fre: out TEUM .57 from .50 taking my profit $ 341.00 BAM!

Yield10 Bioscience (YTEN)


Anything look familiar here?

Gap down, consolidate for a couple of months, break above resistance and fill the gap?

The same pattern that I love and this gap showed us a chance at a 50% move as well. So when it hit my scanner at the end of the day, we got in.

The very next day it actually gapped up and continued to run, filling the whole gap.

 

 

 

And I never leave my members behind:

 


Jan 6, 9:51 AM

luke gal: out of YTEN .195 to .244 + 25%

Jan 6, 9:54 AM

neal rad: YTEN profit out 275.00

Jan 6, 10:10 AM

joel dod: Out YTEN and IBIO +$940. Left 1300 on the table with YTEN. Working around the house and had a sell amount set at .245. +$3,100 since Friday. Ready to kick this week in the arss


Guardion Health Sciences (GHSI)


Well, you can’t have a gap fill without a gap. Once GHSI gaps down, it consolidates in a rounded bottom formation. A little different than the other two, but to the same effect. Learn about every detail with
Profit Prism Platinum

GHSI makes a move back up to the top of the consolidation pattern, and volume rips up as it breaks through resistance. I buy in and the very next day it fills the gap by gapping up, imagine that.

 

 

 

 

And my members?

Jan 6, 9:51 AM

cindy kle: out of GHSI +$309. Nice gain for my small $2000 account

Jan 6, 9:57 AM

brian smi: out GHSI @43 from .27 for 59%

Jan 7, 2:23 PM

stacy edw: I’m an unlimited member and can attest that he is the best mentor and teacher out there, with content on any questions you might have. Successful trades and honest about losing trades…and tp learn from them. I am not paid to say this. Last trade was 42% on GHSI. He’s real.

 

This is not a hard trade, in fact, none of my trades are hard. They are simple, intuitive, and profitable.

I’m about to do something I have never done before… I am starting my new small account challenge with just $500. This is the lowest starting capital I have ever used.

Why?

Well I want everyone out there to have a chance to trade and create wealth. With a starting value of just $500, there are no excuses…

And the Plan? Take the $500 account, return 1000%, and do it in 3 months. You won’t want to miss this.

So if you want to learn how to take a small amount of money… and turn it into something real,

 

 

Join Profit Prism Platinum Now

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

What do all the money managers, financial planners, fund managers, hedge funds etc all have in common?

They rely on you to make money, lots of it… In fact they rely on you to become rich.

Do you think they want you to trade for yourself?

If you knew the truth, they would risk losing fortunes.

For this reason, they have spread the lies that keep so many people away from trading or even trying to learn.

They simply don’t want you to. But guess what? I want you to and I can show you how.

Today I am going to share the 3 Big Lies Wall Street is telling to keep you from trading, and I’m dispel each with the truth…

 

Lie #1 – The Stock Market is a rich man’s game

I’m sure you’ve heard this before. After all, you’ve got to have money to make money right? My whole life I believed this lie.

I knew the stock market held the key somehow, but I didn’t see how the small amount of money I had could make a difference… until I found penny stocks.

This was the key to my success in creating wealth from a small account. Just look at what I have done in small accounts recently as proof that Wall Street is lying.

I started with a 3k account on Nov 11 and in just 2 months was sitting with over 20k in that account.

 

 


Fluke?

In my challenge just before this one, I started with 3k and turned it into over 30K… in 4 months.

 

 

 

I have been running a small account challenge for years now. Not because I can’t trade with more, but because I want to help people get out from under Wall Street’s tight grip.

The stock market was my way out of a 30k per year job… so no you don’t have to be rich to make it in the stock market. Not even close.

In fact, to show you just how little you actually need, I am starting a new challenge with just $500 with the goal of a 1000% return in 3 months.

It’s not hard either. I have a simple 5 step system that makes it clear and simple, not to mention I will be there every step of the way…

Take your first step to freedom with Profit Prism Platinum

 

Lie #2 – You can’t see the same return percentage as someone with a large account.


Lies, Lies, Lies… Fund managers control massive amounts of money and what’s a good return for them?

10%, 15%, even 8%… well, in the two challenges I just showed you, I returned 600% in 2 months and 900% in 4 months. And I do this all the time.

The fund managers couldn’t even dream about doing this. And you don’t need a large account to do it… not even close.

Think about it. When is the last time you saw Apple or Google double overnight or pop 50% or even 20%?

Well penny stocks do it all the time… daily in fact, so growing your small account can be done very fast.

And my custom scanner is set to find the stocks most likely to gap up or make a big move the next day, so I am cashing in big and often.

The FCEL chart below is an example of a stock my scanner alerted me to… 

 

 

 

Dec 27, 9:24 AM

kevin sch: sold FCEL + $420.00


Dec 27, 9:14 AM

Sebastian dia: OUT FCEL +27% – Thanks Jeff!


Dec 27, 9:06 AM

trent ter: out of FCEL at 1.37+ $340


Dec 27, 9:35 AM

Tom Pfister:  Out of FCEL @ 1.58 .. +$1,100


Dec 27, 9:35 AM

david you: Out of FCEL at 1.51 Plus $1,596.12

 

My scanner is finding trades like FCEL every day. I’m looking to enter trades at the end of the day and wake up to take profits the next day.

And there is no shortage of these trades out there. In fact because of all the choices popping up, I don’t even look at a stock if I don’t see double digit potential overnight.

I can’t get into every trade, so I get to cherry pick the very best ones.

 

Lie #3 – You have to spend hours trading each day to make money in the stock market

You’ve seen all the day-traders sitting in dungeons staring at 6 screens all day. It used to be the dream. I mean how cool did that look?

But why… when you can do it in just 10 minutes a day.

You see I started trading when I was an elementary school teacher trying to make ends meet for my family. I didn’t have all day to sit in front of a screen.

So when I learned to trade and created my system, I had to find a way to make money after classes.

This led to my 5 step system that finds stocks at the same time every day, 3:30pm EST.

And it only takes about 10 minutes to run the system and be in some of the market’s biggest movers… the day before.

My system scouts out the stocks likely to move the next day. I can run my scans and be in my trades in just 10 minutes each day.

The next morning I wake up to grab profits, often finding myself in one of the day’s biggest movers.

It’s a simple concept. Wall Street gets rich by keeping you ignorant.

It’s time to change your view. It IS possible to trade on your own.

And I will tell you this, you can make a much bigger return than any money manager will for you.

To learn how… Join Profit Prism Platinum Now

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.