about undervalued stocks and alpha currently, necessary, valuation, positive, generate

badonkus

Hello All,

I want to ask is it necessary that an undervalued stock relative to current market prize will always generate positive alpha in future time period.

For example let say a stock currently trading at $21.4 but its intrinsic value dcf valuation is $21.7 that mean its undervalued at current prize. Required rate of return is suppose 12% and estimated 1-yr future value is $23.7 which will generate 11% return. Based on these data alpha is minus though at current prize stock is undervalued.

Is it possible or not? because on CFA equity books I have read that undervalued stock will generate positive alpha?