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Value Stocks

Value stocks are stocks that have lower prices relative to their fundamental values (growth in sales and earnings). Value stocks tend to have low P/E ratios, low price-to-book ratios, low price-to-sales ratios, and high dividend yields, and they also may be out of favor with investors.

Additional Comments:

One reason might be disappointing quarterly earnings. For example, at the end of the economic expansion period, auto companies trade at lower P/E ratios than the stocks of other companies because investors' expectations for the companies' growth prospects are low. Because investors have relatively low expectations for the immediate growth of these companies, their stocks trade at lower prices relative to their earnings and dividends. Patient investors with longer time horizons are willing to purchase these stocks and wait for their prospective earnings to increase.    

Related Terms:

Growth Stocks
Growth stocks are issued by companies expected to have sustained high rates of growth in sales ...

Cyclical Stocks
Cyclical stock prices move with the economy. Cyclical stocks often reach their high and low points ...

Blue-Chip Stocks
Blue-chip stocks refer to companies with a long history of sustained earnings and dividend payments. These ...

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