How WayUndervalued works

How WayUndervalued Analysis works:

WayUndervalued.com doesn't care about stock charts, headlines, or recent performance.  It doesn't matter if a stock has recently gone up or gone down.  What matters is the current estimated value of a company based on a cash flow of future earnings.

You won't see penny stock recommendations on this web site.  You won't see a "buy of the day", or any short term picks.  WayUndervalued stocks are meant to be held long term, meaning 12 months or longer.

Ever see a stock go up 10% or 20% in a single day after an earnings release, even if the earnings were on par with expectations?  That's because people pay attention to earnings.  Earnings are the best non-emotional way to value a company by mathematically showing what a company is worth.

Sometimes stocks get beat down and become undervalued for a variety of reasons.  Even less often, a stock price goes down enough that it becomes Way Undervalued, or at least 100% undervalued based on earnings.  WayUndervalued is dedicated to identifying stocks that are "Way Undervalued".  The reason a stock is WayUndervalued doesn't matter.  What matters is the value of the company based on future earnings.

More about how WayUndervalued works:

Will this method be right 100% of the time?  Probably not.  The goal is to beat the average stock market return.  In 2013, Way Undervalued picks easily did this.

See: 2013 Way Undervalued picks

The stock must currently trade close to what the company is valued using current EPS and historical P/E ratio. More info on the P/E ratio used is available hereUsing future years estimated earnings, the estimated stock value for both years must be 100% or more than where it trades today to be considered "Way Undervalued".  Earnings growth in future years is also required.  The estimated value is determined by adding up a sum of future discounted earnings.

I have yet to find a place that applies these rules to identify and rank stocks.  This method will weed down thousands of stocks into a handful of Way Undervalued companies using a consistent algorithm applied equally to all companies.

Out of the 5,000+ companies analyzed on this site, here's how this method breaks down (as of March 2014):

 

To summarize:

  1. Companies currently priced at least 50% below their calculated future value are considered undervalued.
  2. Companies currently priced at least 100% below their calculated future value are considered "Way Undervalued".

To learn more about how the P/E ratio for each company is calculated, click here.

All data used by WayUndervalued.com is publicly available.  WayUndervalued.com just analyzes that data in a unique way for a long list of companies, making undervalued companies easy to find.