{"id":355391,"date":"2023-11-01T10:38:00","date_gmt":"2023-11-01T02:38:00","guid":{"rendered":"https:\/\/www.ziet.co\/v2024\/?p=355391"},"modified":"2024-09-27T10:41:55","modified_gmt":"2024-09-27T02:41:55","slug":"how-to-find-undervalued-stocks","status":"publish","type":"post","link":"https:\/\/www.ziet.co\/v2024\/newsletter\/how-to-find-undervalued-stocks\/","title":{"rendered":"#17 How to find undervalued stocks?"},"content":{"rendered":"\n

<\/path><\/svg><\/span><\/span>Estimated reading time: <\/span>4<\/span> minutes<\/span><\/p>\n\n\n

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Timely updates to supercharge your wealth-building journey!<\/p>\n\n\n\n

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TABLE OF CONTENTS<\/strong><\/h3>\n\n\n\n
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  1. How to find undervalued stocks?<\/a><\/strong><\/li>\n\n\n\n
  2. Word of the Week: P\/E Ratio<\/a><\/strong><\/li>\n\n\n\n
  3. Key economic dates: ADP Nonfarm Employment Change, PMI, JOLTs Job Openings, Fed Interest Rate Decision, Initial Jobless Claims, Unemployment Rate<\/a><\/strong><\/li>\n\n\n\n
  4. What I\u2019ve been reading<\/a><\/strong><\/li>\n<\/ol>\n<\/div>\n\n\n\n
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    How to find undervalued stocks?<\/strong><\/h3>\n\n\n\n

    Buying stocks when they\u2019re undervalued, and sell it later at higher price – sounds just about perfect, right?<\/p>\n\n\n\n

    But – how do you know if a stock is \u201cexpensive\u201d or \u201ccheap\u201d to buy at the moment \ud83e\udd37\u200d\u2642\ufe0f? Oh, wait! Enter the P\/E ratio!<\/p>\n\n\n\n

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    The P\/E Basics: What and Why?<\/strong><\/h4>\n\n\n\n

    Simply put, the P\/E ratio tells you the price you’re paying for every dollar of a company’s earnings. It’s calculated by dividing the stock price by its earnings per share (EPS). A P\/E of 20, for instance, means investors are willing to pay $20 for every $1 of earnings!<\/p>\n\n\n\n

    But why should it matter? The P\/E ratio acts as a magnifying glass \ud83e\uddd0, helping to highlight the market’s growth expectations for a particular company.<\/p>\n\n\n\n

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    High and Low P\/E Ratios<\/strong><\/h4>\n\n\n\n

    \u2b06\ufe0fLow P\/E<\/strong>
    Typically, a P\/E below 15<\/strong> is considered on the lower end. This can suggest that the stock is undervalued, potentially offering a buying opportunity. However, it might also indicate skepticism about the company’s future prospects or potential industry-wide challenges.<\/p>\n\n\n\n

    \u2b07\ufe0fHigh P\/E<\/strong>
    Generally, a P\/E above 20<\/strong> is considered on the higher side. You’re paying top dollar because investors are foreseeing the company’s next big hit. Or, it’s just overly hyped.<\/p>\n\n\n\n

    Bear in mind that different sectors have their own P\/E norms. High-growth sectors like tech usually sport has higher P\/E ratios compared to the more stable, predictable sectors like utilities.<\/p>\n\n\n\n

    However, the P\/E ratio isn’t without its flaws<\/strong>.<\/p>\n\n\n\n

    For one, a low P\/E might be due to underlying company issues or sector-wide challenges. Also, it relies on earnings, which can be manipulated with accounting techniques. Sometimes what’s on paper (or a balance sheet) doesn’t translate in real life! \ud83d\udc40<\/p>\n\n\n\n

    And that\u2019s only one way to find undervalued stocks! More methods on its way coming to ya\u2019ll!<\/p>\n\n\n\n

    Other than spotting a good stock, using a great platform definitely helps along with the investing journey! I use Interactive Brokers myself, so if you are just started with IBKR, or wanted to explore more about it, I invite you to dive into this IBKR beginner guide with me! See you over there \ud83d\ude42<\/p>\n\n\n\n

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