Buying a stock is like buying any other schmatte .
Nobody wants to pay retail.
When calling a stock undervalued, we are, in effect, drawing a comparison. Traditional value investors use a company's economic fundamentals as the basis of a buy signal. For example, if XYZ is trading below book value or the multiples of similar stocks, they buy, assuming the shares will eventually reflect their perceived underlying worth. More contemporary value investors are buying the Nasdaq, suggesting that tech stocks are undervalued now that they trade at a fraction of their previous highs. As always, two sides make a market, and there are as many bullish reasons the Nasdaq is undervalued as there are bearish reasons it's overvalued.