<p>A value stock is a share that trades below its intrinsic value, which is derived from the company’s fundamentals such as earnings, dividends, or book value. Investors seek these stocks when the market price does not fully reflect the underlying financial strength of the business.</p>

<h2>How It Works</h2>
<p>Analysts estimate intrinsic value using ratios like the price‑to‑earnings (P/E) ratio, price‑to‑book (P/B) ratio, and dividend yield. If a stock’s market price is significantly lower than these indicators suggest, it may be considered undervalued. Value investors apply a margin of safety, buying only when the discount is large enough to protect against errors in valuation or unexpected downturns. The strategy relies on the belief that the market will eventually recognize the company’s true worth, driving the price upward.</p>

<h2>Why It Matters</h2>
<p>Value stocks can provide steady returns and lower volatility compared with high‑flying growth shares. They often pay dividends, offering income while waiting for price appreciation. For example, during a market slump a well‑established manufacturer might trade at a P/E of 8 while its historical average is 15. A value investor sees this as a buying opportunity, anticipating that earnings will recover and the stock will revert to its typical multiple, delivering capital gains.</p>