A value stock is a form of security that is traded at a price lesser than supposed, taking into consideration the performance of the company and key performance indicators of the stock itself.
How Value Stocks Works
Value stock usually have a high yielding dividend, that is, the percentage the value stocks yields relative to its price is high, it has low price to book ratio, that is, the current closing price of the stock as a percentage of the latest book value per share is low, and value stock has a low price-to-earnings ratio, this means that its current share price as a percentage of its per share earnings is low. All these indicators are evidences of the fact that the stock market is not always efficiently harmonizing price with performance. Investors are always on bet that this inefficiency in the stock market gives them an opportunity for substantial gains.
A value investor seeks value stocks that are trading at a price less than they are worth. There areinvestment guides and services that observe the indicators of value stocks, but investors must understand these analyses and make proper decisions based on their personal instincts and what they think is the performance,value, and the underlying fundamentals of the company itself as well as of its stock.