Top undervalued stocks to watch in 2025

What are undervalued stocks?

Undervalued stocks are the shares of companies with stock prices that are perceived as being lower than they should be – or what their ‘fair’ value is.

The principle behind trading undervalued stocks is that the market will, inevitably, correct itself, and the stock price will eventually reach its fair market value. This means that if you buy a stock while it’s undervalued, you would, in theory, make a profit on it when it increases.

It’s important not to conflate ‘cheap’ with ‘undervalued’ when you’re looking for stocks trading below their fair value. The trick is to find companies that have quality stocks that will rise over time, versus junk stocks at low prices.

Why would a stock be undervalued?

There are multiple reasons why a stock might be undervalued, such as:

• Market changes: Markets can crash or correct themselves, which can tank a company’s stock price
• Negative news: Negative press, and economic and political news could cause a stock price to plummet
• Cyclical changes: Some stocks and sectors are cyclical, meaning they perform well during certain times or economic periods, and tend to dip during others. It’s at these downturns that you can find undervalued stocks
• Overestimated results: If a stock doesn’t perform as well as analysts expect it to, stock traders might sell their holdings, causing the stock to drop below fair value
• Company recognisability: Some companies are simply not familiar enough to get media or analyst coverage, which can lead to them being unknown to stock traders

How to find undervalued stocks

Two good ways to find undervalued stocks are to look at companies’ price-to-earnings ratios (P/E ratios) and their market capitalisations.

A P/E ratio is calculated by dividing the stock price by the earnings per share (EPS). This tells you what investors are willing to pay for a share.

A lower P/E ratio can (but not always) indicate an undervalued company, whereas a higher P/E ratio could signal future growth – but again, not every time.

Market capitalisation is also important because it can tell you how profitable the company is. You can calculate the market cap by multiplying the current stock price by the total number of stocks outstanding (ie shares held by stockholders). 

Where to find undervalued stocks

There are a few places to look for undervalued shares. These include:

• Undervalued sectors: Most sectors go through periods of bull and bear markets. If you find an industry that’s currently down, let’s say that’s mining, you could find a real gem in the sector, capable of significant future growth
• News: Pay attention to the news related to a company and sector. Market crashes, bad press, and political and social changes could all lead to a business becoming undervalued. But beware here – there’s a big difference between cheap and undervalued stocks. Don’t just go for the first company to fall on hard times
• Emerging sectors: New and innovative sectors, such as the biotechnology industry, can contain undervalued stocks that are just waiting for the sector to flourish
• Technical analysis: Using indicators, such as Fibonacci levels and a moving average, can indicate levels of support and resistance, helping you identify potentially undervalued stocks. You can also try a stock screener tool to help you filter companies that might be undervalued

Advantages of undervalued stocks

There are numerous pros to trading undervalued stocks, including:

• Lower stock prices: Stock prices of undervalued companies often trade at a steal, giving investors the ability to buy a large portion of stocks
• Potential for higher returns: Because stock traders can purchase a large number of shares for a relatively low price, should the stock price rise to meet its fair market value, traders can significantly increase their profits
• Built-in safety margin: If the stocks are trading at low prices, you’ve got a built-in safety margin because, should your analysis be wrong, the lower entry price offers some protection

Risks of undervalued stocks

At first glance, it might look as though there aren’t that many risks when trading undervalued stocks, except for the obvious ones – volatility, socio-economics, picking a worthless stock and similar factors. But sometimes, there are reasons why a stock is undervalued that aren’t always obvious.

For example, a stock might be undervalued because of internal structural business changes or financial management issues.

This is why it’s important to thoroughly research any company you plan to trade before taking a position on it – as well as have a good risk management strategy in place.

Top 5 undervalued stocks to watch in 2025

We’ve chosen these five stocks based on their market caps, P/E ratios and the diversification they offer across regions and sectors.

Overview of the stocks in this article

The stocks on our list that can be traded via CFDs with us are:

• Banco Santander SA
• Huntington Ingalls Industries
• ASML Holding

The stocks that can be bought and sold through us are:

• Banco Santander SA
• Huntington Ingalls Industries
• ASML Holding
• Herbalife Nutrition Limited

1. Banco Santander SA (BME: SAN)

Industry: Banking

Market cap: €121.87 billion¹

P/E ratio: 9.757²

Analysts consistently rank Banco Santander among the most undervalued value stocks to buy. It trades at attractive valuation multiples despite strong fundamentals and consistent profitability.

Its diversified geographic footprint provides stability and growth opportunities, particularly in emerging markets like Brazil and Mexico.

The bank's strong capital position, improving cost efficiency and successful digital transformation initiatives are not fully reflected in its current stock price.

Banco Santander's dividend yield remains attractive for income-focused stock traders, supported by steady cash generation across its diverse operations.

The bank's operations are across four main regions: Europe (primarily Spain and the UK), North America (Mexico and US operations) and South America (Brazil, Argentina and Chile). Santander has invested heavily in digital transformation, launching digital-only banks like Openbank and focusing on technology-driven customer experiences.

Highlights:

• The bank reported eight million new customers obtained in Q2 FY25, bringing the total to 176 million³
• Half-year profit increased 13% year-over-year (YoY)⁴
• Operating expenses decreased by 0.4%⁵

2. Huntington Ingalls Industries (NYSE: HII)

Industry: Defence and shipbuilding

Market cap: US$10.4 billion⁶

P/E ratio: 20.04⁷

Huntington Ingalls Industries is the US’s largest military shipbuilder and a premier provider of defence technologies. The company operates through three main segments: Ingalls Shipbuilding, Newport News Shipbuilding and Mission Technologies.

Newport News Shipbuilding is the sole designer, builder and refueler of US Navy aircraft carriers and one of only two companies capable of designing and building nuclear-powered submarines.

Ingalls Shipbuilding builds non-nuclear ships, including guided missile destroyers, amphibious assault ships and Coast Guard cutters.

The Mission Technologies segment provides a wide range of professional services, including fleet sustainment, logistics, engineering and digital solutions to government and commercial customers.

Analysts consider it a top pick among undervalued defence stocks. The company benefits from a substantial backlog of US government contracts, providing revenue visibility for years ahead. And, as geopolitical tensions rise globally, defence spending is likely to increase, particularly in naval capabilities, where HII dominates.

Highlights:

• Q2 FY25 revenue was up US$3.1 billion, while net earnings were US$152 million⁸
• The company has new contract awards worth US$11.9 billion, which resulted in a record backlog of US$56.9 billion⁹

3. ASML Holding (AMS: ASML)

Industry: Semiconductor equipment

Market cap: €247.60 billion¹⁰

P/E ratio: 26.6¹¹

ASML Holding has become the world's leading manufacturer of photolithography systems for the semiconductor industry, holding a virtual monopoly in extreme ultraviolet (EUV) lithography machines essential for producing the most advanced computer chips.

Its machines are critical for manufacturing processors used in smartphones, computers, servers and AI applications.

The company's core business revolves around developing, manufacturing and servicing lithography systems that enable semiconductor manufacturers to create increasingly smaller and more powerful chips.

Its EUV machines, which can cost over US$200 million each, use extreme ultraviolet light to etch circuit patterns onto silicon wafers with incredible precision. The company serves all major semiconductor manufacturers, including TSMC, Samsung, Intel and others.

China-related uncertainties have pressured the stock, which has created a potential buying opportunity for long-term stock traders.

Highlights:

• In its latest quarterly report, net sales totalled €7.7 billion¹²
• It had a gross margin of 53.7% in the same quarter¹³
• It spent €1.2 billion on research and development (R&D), indicating its commitment to advancing its services¹⁴

4. Herbalife Nutrition Limited (NYSE: HLF)

Industry: Consumer staples

Market cap: US$988.78 million¹⁵

P/E ratio: 2.88¹⁶

Originally a small multilevel marketing business, Herbalife has grown into a global nutrition company that develops, manufactures and sells weight management, targeted nutrition, energy and fitness, and outer nutrition products. It operates in over 90 countries worldwide.

Herbalife trades at relatively low valuations compared to other nutrition and wellness companies, partly due to regulatory overhang and scepticism about its business model. However, it maintains strong cash generation capabilities and a loyal global customer base.

The growing global focus on health and wellness, particularly post-pandemic, creates favourable market conditions for nutrition companies.

Herbalife's international diversification provides growth opportunities in emerging markets where wellness awareness is expanding.

If the company can successfully navigate regulatory challenges and continue improving compliance, the stock could benefit from multiple expansions.

Highlights:

• Its Q2 FY25 earnings results indicate that its adjusted EBITDA of US$173.6 million exceeds guidance¹⁷
• In the same period, gross profit margin increased to 78%¹⁸
• In July 2025, the company released a new weight-loss supplement called MultiBurn

5. Xi'an NovaStar Tech (SZSE: 301589)

Industry: Technology – electronic components

Market cap: CNY13.73 billion¹⁹

P/E ratio: 25.71²⁰

Xi’an Novastar, also known as Nova Nebula, was founded in Xi'an, China, in 2008 and has evolved into a globally competitive LED display solution service provider.

The company operates as a technology-driven enterprise with algorithms as its core competency, supported by comprehensive software and hardware solutions centred around LED display screens, serving customers worldwide.

NovaStar trades at attractive valuations despite its strong market position in the rapidly growing LED display industry.

This market is experiencing healthy growth, driven by increasing adoption in advertising, entertainment, retail and smart city applications globally.

NovaStar's dominant position in LED control systems provides recurring revenue opportunities and strong customer retention, and the company's active share buyback programme demonstrates management confidence with value returns to shareholders.

Highlights:

• Its Q1 FY25 earnings show revenue is forecast to grow 39% per year over the next two years²¹
• This contrasts with a predicted 17% growth in the electronics sector in China²²

How to trade undervalued stocks with IG UAE

CFDs

1. Open a CFD trading account with IG UAE
2. Search for undervalued stocks on the IG platform
3. Decide whether to go long (buy) or short (sell)
4. Choose your position size
5. Set stop-loss and limit orders
6. Place your trade and monitor it

Stock trading

1. Open a stock trading account with IG UAE
2. Search for undervalued stocks
3. Choose the stock you want to buy – try our stock screener
4. Determine how many shares you want to purchase
5. Place your order
6. Monitor your investment and collect any dividends

FAQs about undervalued stocks

Footnotes
 

1. TradingView, August 2025
2. TradingView, August 2025
3. Banco Santander Q2 FY25 earnings report, July 2025
4. Banco Santander Q2 FY25 earnings report, July 2025
5. Banco Santander Q2 FY25 earnings report, July 2025
6. TradingView, August 2025
7. TradingView, August 2025
8. HII Q2 FY25 earnings report, July 2025
9. HII Q2 FY25 earnings report, July 2025
10. TradingView, August 2025
11. TradingView, August 2025
12. ASML Q2 FY25 earnings report, July 2025
13. ASML Q2 FY25 earnings report, July 2025
14. ASML Q2 FY25 earnings report, July 2025
15. TradingView, August 2025
16. TradingView, August 2025
17. Herbalife Q2 FY25 earnings report, July 2025
18. Herbalife Q2 FY25 earnings report, July 2025
19. TradingView, August 2025
20. TradingView, August 2025
21. Simply Wall St, August 2025
22. Simply Wall St, August 2025