How to find undervalued companies?

Look for comapnies selling at a discount. Bear markets offer opportunities to buy strong franchises at inexpensive valuations. Hence, to identify a company, following points must be kept in mind.

  1. Strong financial position ā€“ low debt to equity relative to the sector, strong liquidity
  2. A strong brand name, franchise or industry position
  3. Low valuation multiples (relative to the sector and/or history keeping in mind long-term profitability potential)
  4. Ideally depressed margins or earnings though very few companies match this criteria given the peak earnings/margins situation we are in.

Additional Reading

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