Which ratios would an investor use to determine whether a stock was undervalued?

Activity ratios measure how efficiently a company utilizes its assets to generate sales or revenue. Examples include inventory turnover and accounts receivable turnover. While these ratios are important for assessing operational efficiency, they do not directly indicate stock valuation or whether a stock might be undervalued.

Leverage ratios evaluate a company's debt levels in relation to its equity or assets, such as the debt-to-equity ratio. These ratios provide insights into financial risk and capital structure but are not used to determine stock valuation or to assess whether a stock is undervalued.

Liquidity ratios, like the current ratio and quick ratio, measure a company's ability to meet short-term obligations. While liquidity is crucial for assessing financial health, it does not provide information about stock price relative to value, making it unsuitable for determining if a stock is undervalued.