4 Metrics to Use to Find Undervalued Stocks

There are many investment strategies you can adopt to help you reach your financial goals. One approach is to find fundamentally sound companies that the market has undervalued. A company's stock price is not always reflective of its intrinsic value, and investing in undervalued companies -- while not the only means of finding a good investment -- is a great way to put yourself in a position to succeed in the long run. That said, here are four metrics that can help you find undervalued companies.

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A company's P/E ratio is one of the best figures to use when determining whether or not a company is undervalued or overvalued. To find a company's P/E ratio, you must first know its earnings per share (EPS). You can find the EPS by dividing a company's profits by the number of outstanding shares. Then, take the company's stock price and divide it by the EPS to find the P/E ratio. The higher the P/E ratio, the more expensive a stock is relative to its earnings.

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Source Fool.com