What is a "value stock"?

A "value stock" refers to a stock that is considered to be undervalued and is trading below its intrinsic value. This means that the market price of the stock does not fully reflect the company's true worth based on its fundamentals, such as earnings, revenue, and growth potential. Investors often look for value stocks as they may represent a good investment opportunity; the idea is that the market will eventually recognize the stock's true value, leading to price appreciation.

Value stocks typically have lower price-to-earnings (P/E) ratios compared to their growth-oriented counterparts, which can indicate that they are undervalued. Investors who adopt a value investing strategy seek out these stocks with the expectation that their prices will rise over time as the market corrects this undervaluation.

In contrast, stocks that are trading above their intrinsic value might not fit the definition of a value stock. Additionally, while high dividend-paying stocks can be value stocks, they are not exclusively classified as such because the presence of high dividends does not guarantee that the stock itself is undervalued based on fundamentals. Lastly, technology stocks with rapid growth potential are typically categorized as growth stocks, not value stocks, as growth stocks are often priced for future growth rather than current or historic metrics