Fung Chee Fui: In the case of whatever future generated long term cash flows not being eventually transferred to the pocket of the shareholders, but the pocket of management.
Chinmay S Sangoram: If it is undervalued, it’ll definitely go up. If, for any reason, it won’t be going up, then it isn’t undervalued.. To be undervalued, is to be at par – with one’s peer group – on all other parameters except market price..
Rohit Sharma: First case : when it looks undervalued but actually not. It may look undervalued due to shrewed accounting practice. It may go up sometimes but eventually will come Down.Second case : it may look undervalued to you but mr. may consider it overvalued or fairly valued. It will go up when market recognize its value. For example a company is holding a big piece of land. You somehow find out that ot has got oil in it but market dont. Once everyone comes to know , vakue will start unlocking.
Ted Vailas: If a business truly is undervalued at the time you buy it, management could make poor decisions that destroy value which would eventually eat away at your margin of safety and potentially pull the intrinsic value below your initial investment price. This is why it’s important to watch the company very closely after you buy.
Gilad E Tsur Mayer: I wonder how can any person who is not an insider , would know if the management is know what they are okay?
Sarah Mason: CGA
Pavel Gdetibil: When produced cash flow is wasted on projects below cost of equity.
Brent Legendre: if the company is being passed up by new technology or new competition
Brent Meadors: it’s all about free cash flow (no free cash flow / decreasing free cash flow) will wreck any company. I think everyone who invests in dividends should watch Kevin O’Leary investing tips he explains why he only chooses dividends and the power of free cash flow.
Vishwamithra Shashishekara: Cheeky first principles answer:When there’s no agreement between buyers and sellers to exchange stock at a particular price above the current price.Probably more useful answers:Signs of management not delivering to unlock the value, thus discouraging the buyers.Or maybe the market simply does not recognize the undervaluation. You may see this more among the small, underfollowed stocks.
Koay YP: The industry is about the be sunset
Dong Estrobo: Cpg is a reverse example! XD
Vijay P Singh: If the management integrity is under questions 😊😊😊
Guille Ggh: If it is really undervalued, it will eventually go up. Undervaluation is an absolute (and not relative) qualification – at least for value investors . If what you actually meant was “good business seemingly cheap all around but won’t ever go up”, i would say that the usual case has to do corporate governance and shareholding structure.For example: There are plenty of great instrastructure stocks in Europe trading at less than 7x free cash flows. These are amazing cash flow machines with super wide economic moats that you could not outcompete in any meaningful way. The problem is that only 20% of the outstanding shares are free floating, while the remaining 80% shares are owned and controlled by a parent company. If that is the case, as a value/activist/private equity investor, if you buy the stock you would not be a fractional business owner as you would not have a meaningful right to the free cash flows. Buying these low float stocks simply mean you have the right to whatever the parent choose to disburse as dividend payment. For that reason, a great company trading well below the present value of cashflows might forever stay “cheap”. The only way to value these things is based on the dividends, which are generally a small fraction of the FCFE.
Pranjal Kamra: The real question is whether the stock is “actually undervalued or is a value trap.
Lester Connolly: If you ask, when will undervalued stock never grow, so it is easy to explain. The stock will stay some years down and undervalued, if nobody wants to buy this stock, everybody wants to sell, because the net income of the company is long time negative (like by Tesla) and the company is going bankrupt (like Air Berlin or Solarworld). This one stock is undervalued with P/B and P/S, but not with P/E. In this case is the P/E some hundred or NA (=negative). So the stock of Tesla should be undervalued, but it is strongly overpriced, for the stupid interest of trading computers, day traders or silly people.