Identifying globally undervalued stocks

Everyone wants to invest in inexpensive but fast-growing companies with a big future – taking full advantage of what is ahead and profiting.

But there are two issues that quickly arise – how do you know which company is undervalued and how can you set yourself up to invest in it.

Global brokerage firm Interactive Brokers has taken care of both these with their innovative GlobalAnalyst tool, which lets investors compare the relative valuations and financial metrics of stocks globally. 

Investors can search for stocks by region, country, industry, market capitalisation and currency to identify undervalued stocks.

A table displays current market and various financial metrics, in an easy-to-use and sortable format, meaning more time can be spent in making more informed investment decisions.

One handy feature that GlobalAnalyst offers is the P/E/G Ratio (Price to Earnings divided by three-year compound earnings growth rate).

The PEG ratio, by definition, will be equal to 1 when the growth rate of earnings is equal to the PE ratio. As the growth rate of earnings increases above the PE ratio, the PEG ratio becomes smaller, and as growth goes lower, PEG becomes higher. Sell the stocks above a PEG of +1 and buy the ones below -1, could be a valid strategy. 

If the PE and the growth rate are maintained, the stock price will rise by the growth rate. If you start looking for companies to buy with low PEG ratios or to sell companies with high ones, always make sure to look into the company. Look at future earnings projections by analysts, look at regulatory filings, contact Investor relations to understand unusual data.

Look at the long term prospects of the industry; will it grow or shrink and how fast and how long? Look at the company’s competitive position within the industry. Adjust earnings growth estimates according to your data.

It is discipline and careful data gathering that sets apart the winners from the losers.

GlobalAnalyst also works smoothly with the IBKR GlobalTrader app, meaning you need only one app and one account for all your trading needs, quickly taking advantage of opportunities.