Which of the following is considered a sign of a potentially undervalued stock?

A low price-to-earnings (P/E) ratio is often considered a sign of a potentially undervalued stock because it indicates that the stock is trading at a lower price compared to its earnings. Investors typically use the P/E ratio to assess a company's valuation relative to its earnings. When a stock has a low P/E ratio compared to its industry peers, it may suggest that the market is undervaluing the company's earnings potential or that the stock is undervalued in general.

This situation can arise for several reasons, such as temporary setbacks in the company's performance that market participants believe will not persist, or because the broader market is too focused on growth stocks and neglecting value opportunities. Thus, a low P/E ratio can signal to investors that there might be an enticing buying opportunity, as the stock may be positioned for future appreciation once the market corrects its assessment of the company's value.

In contrast, the other options provided do not typically indicate undervaluation. A high P/E ratio suggests that a stock is expensive relative to its earnings, strong positive correlation with market trends indicates alignment with market performance rather than value, and low earnings per share relative to industry peers can imply underperformance overall rather than undervaluation specifically.