Top 4 Most Undervalued Stocks in the S&P 500: April 2026

The most undervalued stocks in the S&P 500

Below is a table of four of the most undervalued dividend-paying stocks in the S&P 500, ranked from lowest to highest trailing P/E ratio. We've also included their dividend yields. These stocks also have price-to-book-value ratios and debt-to-equity ratios under 100%. We explain the importance of all of these metrics below.

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How to find undervalued stocks

If you’re looking for undervalued stocks, there are strategies you can use. A general principle is to ensure individual stocks don’t make up more than 10% of your portfolio. You can fill in the rest of your portfolio with stock-based funds such as index funds.

One tool that comes in handy for finding undervalued stocks is a stock screener. A stock screener is a tool that makes it easier to sort through stocks using specific search criteria. They're available at brokerages such as Fidelity and on platforms like Morningstar and Yahoo Finance. (Take a look at our list of free stock screeners.)

Here are some signs of undervaluation to look for with a screener.

1. Screen for low price ratios like price-to-earnings and price-to-book

One way to find undervalued stocks is by looking for companies with low valuation ratios, which indicate that their share prices are low relative to measures of their actual profitability and economic value.

One of the best-known valuation ratios is the price-to-earnings ratio, also known as P/E ratio. The P/E ratio is calculated by dividing the company’s stock price by its annual earnings per share. What is a good P/E ratio? That varies by industry, but under 20 is a good rule of thumb; that's the cutoff we used for the table above. More broadly, if you find that a company’s stock has a lower P/E ratio than most of its competitors, there’s a chance you could be getting valuable stock at a discount.

Another useful valuation ratio is the price-to-book ratio, or P/B ratio. This equals the company's stock price divided by its book value per share. Book value is the amount of money a company would fetch if it were shut down and sold for parts. It's equal to the company's total assets (e.g., its inventory, real estate holdings and intellectual property) divided by its liabilities (e.g., its debts, unpaid operating costs and payroll expenses). Generally, companies with a P/B ratio below 1 are considered undervalued, but again, this varies by industry, and it's good to compare a company's P/B ratio with its competitors'.

» Dive deeper: How price-to-earnings ratios work

2. Keep an eye on the debt-to-equity ratio

Valuation ratios are useful, but they don't always tell you the full story — sometimes, there's a reason why a company trades at a low P/E or P/B ratio. One thing to watch out for is a high debt burden, which may not show up in these metrics.

Fortunately, many stock screeners also allow you to look at a stock's debt-to-equity ratio, which measures a company's total debt divided by its total shareholders' equity. (Total shareholders' equity is the same thing as total book value. The former is an investing term, and the latter is an accounting term, but they're the same number.) A good rule of thumb is to look for companies with a debt-to-equity ratio below 100%.

3. Look for dividends

Dividends are a portion of a company's earnings (profits) paid out to shareholders, so they are generally a sign of profitability. A company's dividend yield is equal to its annual dividends per share divided by its share price, so a high dividend yield is sometimes a signal that investors are undervaluing that company relative to its profitability.

However, dividend yield isn't a foolproof metric — sometimes, a company has a high dividend yield (in other words, a low price relative to its dividend) because investors think something bad is about to happen that may force the company to cut its dividend, such as a downturn in revenue or earnings. Thus, dividend yield is best considered alongside other valuation metrics, such as those described above.

» Learn more about dividends

4. Target undervalued sectors

You could also consider specific market sectors when hunting for undervalued stocks. For example, if tech stocks are on the decline, you could look for companies that have declined along with the rest of the sector, but still show potential for strong growth over the long term.

When undervalued stocks become popular

Undervalued stocks can become more attractive to some investors in times of stock market volatility. Companies whose stock is undervalued may have strong cash flows and balance sheets. So even if prices dip, investors buy because they’re getting what they believe is valuable stock for less before prices shoot up.

Undervalued stocks can also become popular when a promising company experiences exponential growth but also shows volatility or price dips. Tesla is one example of this.

Tesla pioneered an industry for electric vehicles, an emerging technology with growth potential at the time. Tesla made its initial public offering in June 2010 at $17 per share. Nine months later, its shares were sold at about $4 a share. At that point, the stock could've been considered undervalued and could've been more attractive to investors who saw the company's potential. Of course, when you're looking back in time, it's very easy to pick out previously undervalued stocks. What's difficult is picking out undervalued stocks before they become highly valued, like Tesla is now.

All investing comes with risks, and undervalued stocks carry risk, too. You could invest in something like Tesla and make massive gains … or not. Some companies with undervalued stock don’t succeed, and sometimes investments further depreciate or take longer to decline in value. If you’re not quite sure about a stock, consider talking to a financial advisor.

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