Strategy Intermediate: Value Investing

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1.
Which of the following is the least likely reason that a stock may be undervalued?
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Interest rates have fallen in the past year. Falling interest rates would make it easier for the company to borrow funds, grow, and increase earnings, which would likely result in an increase in the price of its stock.
2.
Value investors aim to assess a stock based on its historical performance in the market.
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False. Value investors aim to assess a stock based on the companys strengths and prospects, independent of the stocks performance.
3.
Value investing is about measuring a companys past performance, not forecasting its future profits.
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False. Value investing is about measuring a companys capacity and potential for growth.
4.
A value stock is one that is undervalued in the marketplace.
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True. A value stock is worth more than its current market price indicates.
5.
A low price-to-book (P/B) ratio means _______.
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Less than 1. Mathematically, it means less than 1.