Best undervalued stocks to watch in 2026

In a bull market, it can be hard to uncover undervalued companies. The S&P 500 is within touching distance of 7,000 points while the FTSE 100 has risen above 10,000 for the first time ever. Many analysts remain concerned that the AI trade has driven large cap valuations beyond what is fundamentally reasonable based on traditional metrics, such as revenue, margins and profits.

For context, the US market is by far the largest and most developed in the world, and it’s achieved three consecutive years of double-digit gains: 16% in 2025, after rising 23% in 2024 and 24% in 2023.

Understanding undervaluation

However, opportunities still exist for patient investors willing to look beyond the headline indices and popular mega-cap tech stocks. While attention is concentrated on AI beneficiaries, overlooked quality businesses in industrials, healthcare, or the financial sector may offer better value — particularly mid-caps which frequently lag their large-cap counterparts during the initial phases of bull markets, creating potential entry points for those with longer time horizons.

International markets may also present another options for value-oriented investors. While European indices have done as well or in many cases better than the US last year, many emerging market equities are trading at significant discounts despite reasonably solid fundamentals.

This remains speculation though. The core concept for value investors is that of quality over momentum: rather than chasing performance, focusing on companies with strong balance sheets, consistent cash generation, competitive moats and management teams with track records of capital allocation discipline. This is key to identifying businesses trading below their intrinsic value.

In fact, this is a solid principle during all market bull runs; maintaining discipline regardless of sentiment, and understanding what you own, why you own it, and what price makes sense relative to the underlying business quality and growth trajectory.

Undervaluation metrics

There are many ways to analyse whether a stock is undervalued, including:

• Price-to-Earnings (P/E) Ratio — a stock trading at a lower P/E ratio than its industry peers or historical average may be undervalued. For example, if similar companies trade at 20x earnings but one trades at 12x and with comparable fundamentals, it might represent a value opportunity
• Price-to-Book (P/B) Ratio — when a stock trades below its book value (the company's net asset value), it may be undervalued. A P/B ratio under 1.0 suggests the market is pricing the company below what it would theoretically be worth if liquidated, though this varies significantly by industry
• Discounted Cash Flow (DCF) analysis — this involves projecting a company's future cash flows and discounting them back to present value. If this intrinsic value exceeds the current stock price, the stock may be undervalued
• Dividend yield — a higher than average dividend yield compared to peers or historical norms can signal undervaluation, assuming the dividend is sustainable because it suggests investors are getting more income return relative to the price they're paying
• Market sentiment — sometimes stocks become undervalued due to temporary setbacks, negative news cycles or broader market pessimism that doesn't reflect the company's long-term fundamentals. Contrarian investors often look for quality companies trading at depressed prices due to fixable problems or overreactions

Of course, these metrics don't exist in isolation. A low P/E ratio might indicate a genuine undervaluation, but it could also reflect real concerns about declining earnings, competitive threats or structural industry challenges. Value investing is an art as much as it is a science, with success often lying in distinguishing between stocks that are cheap for a reason and those that are genuinely mispriced by the market.

Successful investors tend to combine multiple metrics while conducting thorough qualitative analysis of management quality, competitive advantages and industry trends. They also consider macroeconomic factors, regulatory environments and whether the company's business model remains viable in changing market conditions.

Context can also be dramatically different across different sectors and market cycles. Technology companies often trade at higher P/E ratios than utilities because investors expect faster growth, so a low P/E in tech might still be higher than a high P/E in mature industries.

Similarly, asset-heavy businesses like banks or manufacturers are better evaluated using P/B ratios, while service companies with few tangible assets might appear expensive on that metric despite being fairly valued. During market downturns, even quality stocks can appear undervalued by historical standards, but those historical comparisons may no longer be relevant in changed circumstances.

This is why experienced value investors try to buy at prices significantly below calculated intrinsic value to account for estimation errors and unforeseen risks.

Best undervalued stocks 2026

The following five stocks have been chosen as examples for their strong brand name recognition and perceived undervaluation compared to peers. It’s important to remember that an ‘undervalued’ stock by one of the common metrics does not guarantee an undervaluation, and that stocks which are undervalued can remain so for years to come.

Intel

Intel is a global tech company that designs, manufactures and sells computer components, including its powerful Central Processing Units (CPUs) for PCs, servers and other devices, but also GPUs, AI accelerators, and networking hardware.

The business dominates the PC processor market with a circa 60% market share and benefits from strong customer relationships that it’s built over decades. The company’s massive scale provides economies in R&D spending, and it's one of the few Western companies attempting to build a competitive foundry business, which has strategic value and is receiving substantial government subsidies through the CHIPS Act.

Intel's brand power in enterprise computing remains strong, and its data centre business, while challenged, still generates substantial cash flow. The company's x86 architecture has deep software compatibility advantages, and recent product releases show signs of closing the performance gap with AMD.

However, Intel faces severe structural challenges that justify market scepticism. The company has fallen multiple generations behind TSMC in manufacturing process technology, the foundation of chip performance and efficiency. This has allowed AMD to gain significant server market share while NVIDIA dominates AI accelerators, a massive growth market Intel essentially missed.

Its foundry also strategy requires tens of billions in capital expenditure with uncertain returns and no guarantee of attracting major customers. Intel's margins have also compressed dramatically as it invests heavily while losing pricing power, and the organisational culture has been criticised for complacency, with execution missteps that have repeatedly disappointed investors.

Ford

Ford manufactures automobiles including trucks, SUVs, cars and electric vehicles, along with commercial vehicles and related financing and services.

The company's F-Series trucks have remained one of America's best-selling vehicles for over 40 years, generating substantial profits and fierce customer loyalty. Ford Pro, its commercial vehicle and services division, is highly profitable with strong recurring revenue streams.

The company was early among traditional automakers in committing to EVs, and its Mustang Mach-E and F-150 Lightning have gained traction. Ford also enjoys a strong brand with over a century of heritage, extensive dealer networks, and improving quality metrics.

The company's BlueCruise hands-free driving technology is competitive, and it avoided bankruptcy during the financial crisis unlike GM, maintaining a scrappier reputation.

However, the business faces massive capital requirements to transition to EVs while simultaneously supporting legacy internal combustion engine production, creating a costly two-track strategy. It even decided to take an $18.5 billion hit on the EV business to scale back last year.

The company also has high labour costs due to UAW contracts, including significant pension and healthcare obligations that newer competitors don't carry. EV margins remain minimal while competitors with premium branding power like Tesla remain profitable, and Chinese EV makers present an existential threat with lower-cost products.

Ford's debt levels are also remain elevated, while the wider auto industry's cyclicality means recession fears weigh heavily on its valuation.

Vodafone

Vodafone operates mobile and fixed-line telecommunications networks providing voice, messaging, data and broadband services across Europe and Africa.

The company has strong market positions in its key countries, with over 350 million customers globally. Its infrastructure represents decades of investment and provides high barriers to entry in established markets.

Vodafone has been divesting non-core assets and simplifying its structure, which could unlock value and improve focus. The company offers an attractive dividend yield that appeals to income investors, and its African operations (through Vodacom) provide exposure to faster-growing emerging markets. The ongoing 5G rollout creates upselling opportunities, and consolidation in European telecom could allow for better pricing dynamics.

However, Vodafone is burdened by significant net debt, one of the highest levels in the telecom sector, which constrains its strategic flexibility and may be forcing asset sales. European telecom markets are also brutally competitive with razor-thin margins due to regulatory pressure on pricing and requirements for network sharing.

Revenue growth is also essentially flat in mature markets where penetration is complete and customers are price-sensitive. The company requires continuous heavy capital expenditure for 5G and fibre buildout, limiting free cash flow generation.

Regulatory authorities consistently oppose consolidation that might improve industry economics, and Vodafone has underperformed operationally compared to peers in execution and customer satisfaction. The dividend, while attractive, may also be unsustainable given debt levels and free cash flow generation, creating risk of a cut that could damage the stock price.

Pfizer

Pfizer develops and manufactures prescription medicines and vaccines across multiple therapeutic areas including oncology, inflammation, cardiovascular disease and infectious diseases.

The company came into its own during the pandemic, developing and manufacturing the world's most widely-used vaccine in record time, showcasing its scientific prowess and operational execution. This success generated massive cash flows that funded the $43 billion Seagen acquisition, adding a strong oncology pipeline with promising antibody-drug conjugates.

Pfizer's scale provides advantages in R&D investment, manufacturing and global distribution that smaller biotechs cannot match. The company also has a strong track record of integrating acquisitions and maintaining a steady dividend, appealing to long-term investors. And its financial

position remains solid with investment-grade credit ratings, with management articulating a clear strategy to return to growth.

However, Pfizer faces a revenue cliff as pandemic product sales normalise, while key products face patent expirations in the coming years, including Eliquis (its blood thinner) which generates billions annually.

The Seagen acquisition, while strategically sound, also comes with integration risks and the oncology drugs won't peak for years. And Pfizer's own pipeline, while extensive, has had several late-stage clinical trial failures. The company now also operates in an environment of intense political pressure on drug pricing, particularly in the US, threatening margins.

Bank of America

Bank of America provides banking and financial services to consumers, businesses and institutions, including deposits, lending, credit cards, wealth management and investment banking.

It’s the second-largest bank in the States with unmatched scale and distribution, serving over 70 million consumer and small business clients through extensive branch networks and leading digital platforms.

The company has also made massive technology investments resulting in industry-leading mobile banking adoption, with over 45 million digital users.

Its wealth management division (Merrill Lynch) is a powerhouse serving high-net-worth clients with fairly sticky relationships and fee-based revenues. Bank of America also has a strong deposit franchise providing low-cost funding, and its credit quality has historically been solid with disciplined underwriting.

The bank emerged from the 2008 financial crisis significantly stronger with improved capital ratios, streamlined operations, and reduced regulatory issues. Rising interest rates initially benefited net interest margins, and the company has returned substantial capital to shareholders through dividends and buybacks.

However, the bank has massive unrealised losses on its securities portfolio due to rising interest rates, tying up capital even if not immediately realised. Deposit costs have risen sharply as customers seek higher yields, compressing net interest margins from their peaks, and pressure is likely to continue.

As a systemically important financial institution, Bank of America also faces stricter capital requirements and regulatory scrutiny than smaller banks, reducing returns on equity. The bank is highly sensitive to economic cycles, and concerns about commercial real estate exposure, consumer credit deterioration and a potential US recession may be creating an overhang.

Competition from fintech companies and non-bank lenders also threaten its core businesses, particularly in payments and lending. Bank of America also has limited international diversification compared to peers like Citigroup or JPMorgan, concentrating its geographical risk in the US economy.

Undervalued stocks summed up

• With the S&P 500 near 7,000 after three years of double-digit gains, finding undervalued stocks is becoming harder
• Investors assess undervaluation through metrics like P/E ratios, P/B ratios, DCF analysis and dividend yields, but most combine these with qualitative analysis since low valuations can reflect real problems rather than mispricing
• Intel, Ford, Vodafone, Pfizer and Bank of America may be potentially undervalued but also face challenges
• Successful value investing requires distinguishing between stocks that are cheap for good reasons versus those genuinely mispriced