Business, Legal & Accounting Glossary
An orphan stock is a stock that is not preferred by investors. It has essentially been abandoned or forgotten. If a stock is considered small or in an out-of-favour sector, it may be ignored in this way. An orphan stock is also called a wallflower stock because it is so easily overlooked. As a result of being ignored, an orphan stock may trade at a low price-to-earnings ratio, which illustrates what investors are willing to pay per dollar of earnings. The low P/E of an orphan stock usually indicates the earnings aren’t worth much. Still, some investors view an orphan stock as an undiscovered bargain rather than an unfavourable investment. Should an investor take a risk and purchase an orphan stock, he may enjoy a high return on the investment – if the orphan stock is rediscovered.
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This glossary post was last updated: 6th February, 2020 | 0 Views.