Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Large-Value Stock

What it is:

A large-value stock is a stock whose intrinsic value is greater than its market value.

How it works (Example):

Let's say John Doe is analyzing Company XYZ. He uses a discounted cash flow model to determine that the intrinsic value of the stock is $15 per share. However, the stock is only trading at $10 per share. In other words, it is a large-value stock.

Why it Matters:

A stock may become a large-value stock in one of two ways. First, there might be a drop in demand driven primarily by investor perceptions. If a drop in price is not justified by the issuing company's actual financial status as manifest by its fundamentals and analyst growth projections, the security could be undervalued.

The second way by which a stock may become a large-value stock is if its fundamentals (i.e., revenue, earnings, growth projections, balance sheet, ect.) rise while its market price remains constant. If the security was already fairly valued, and does rise in price when the fundamentals improve, then security is likely a large-value stock.

A large-value stock is likely to experience a price rise and return to a level that better reflects its financial status and fundamentals. Investors try to find 30-day annualized  large-value stocks because they are considered a good buy.