What is an Overvalued Stock or an Undervalued Stock?

The actual value of a stock is referred to as its intrinsic value. It is the true worth of an asset, irrespective of how it is trading in the stock market.

When you compare the current price of a stock with its intrinsic price, there are three scenarios:

Overvalued stock - Current price is higher than the calculated “intrinsic” share price
Stock is where it should be - Current price is in the vicinity of the calculated “intrinsic” share price
Stock is undervalued - Current price is lower than the calculated “intrinsic” share price.

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