Some investors choose to focus on value stocks. Find out what they are and how to identify them in the MoneySense Glossary.
Stocks viewed as bargains relative to the underlying value of the business are referred to as value stocks. Value stocks are often identified by low price-to-book-value (P/B) ratios or low price-to-earnings (P/E) ratios. Investors expect to profit when prices eventually rise to reflect the intrinsic value of the business.
Example: “When researching value stocks, investors must determine whether a stock trading at a low price-to-earnings ratio is truly a bargain or just a bad business trading at a fair price.”
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