Fairly Valued

A fairly valued stock is a stock whose perceived value is equal to its current market value. Not every investor uses the same criteria when deciding if a stock is fairly valued. Some investors use a multiple such as a stock's price to earnings ratio (PE Ratio) or price to sales ratio to determine if a stock is fairly valued . Other investors determine if a stock is fairly valued based upon projected future earnings of the underlying company. Still other investors accept the open market value of a stock when deciding what is fairly valued. All things being equal, a fairly valued stock has a better chance of appreciating than a stock that is overvalued at the time of purchase.