How to find undervalued stocks in India: PE Ratio, PB Ratio, Dividend, DE Ratio

Most legendary investors such as Warren Buffet or Benjamin Graham emphasise value investing. They always look for opportunities to buy good businesses when they are undervalued. This article will focus on indicators such as PE ratio, PB ratio, dividend, DE ratio, etc., to identify undervalued stocks.

While investing in stocks, investors will naturally want to buy them at the best price. A stock is said to be undervalued when the market share price is lower than the fair value. For example, if the market gives an average price to earnings (PE) multiple of 25 to IT stocks, and a particular IT stock is trading at a PE multiple of 20, it may be said that the stock is undervalued. Similarly, if the market gives an average price to book (PB) ratio of 3 to private bank stocks, and a particular private bank stock is trading at a PB ratio of 2.5, it may be said the stock is undervalued. Undervaluation may be due to various reasons. It could be that many investors have not discovered the stock, or the company is going through a temporary underperformance patch due to some issues that may get ...

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