For various reasons, investors might decide to stay away from a particular stock. It might mean valid concerns, but sometimes people can get it wrong, with misplaced fears. As a result, that’s what can make a FTSE share undervalued. Here’s one such case that I think has been overly shunned by investors.

Long-term share price losses

I’m referring to Ferrexpo (LSE:FXPO). The business operates iron ore mines in Ukraine, making money from producing and selling iron ore pellets, which are used in steel production. Over the past year, the stock is up by 62%.

But wait, I referred to the company as being the most punished FTSE stock. This is because even though the share price is up over the past year, it’s down 71% since February 2022. This ties in with the start of the invasion of Ukraine by Russia.

The impact of the war on Ferrexpo has been high. It has severely disrupted its mining operations. The instability has led to operational challenges, reduced production, and heightened risks associated with conducting business in a conflict zone. In fact, Ferrexpo has been able to operate only one or two of its four pelletizing production lines over the past year.

Further, the company has recently been facing legal issues regarding potential illegal mining activities and environmental damage.

Given the impact of all of the above on the finances, I completely understand why the share price has fallen. But based on my outlook, I think the share price should be trading significantly higher.

A large potential catalyst

It’s clear that there’s renewed focus on striking a peace deal between Ukraine and Russia. President Trump has made this clear. I think that this will happen within the coming few months.

The impact of this should help to catapult the stock price higher. The business should be able to access more ports, as in the past, enabling exports to increase almost overnight. I’d expect more of the pelletizing production lines to come back on-line, allowing the output to increase to match export demand.

There will likely be a large-scale project to rebuild Ukrainian cities. I’d expect steel production to soar, with iron ore supplied from Ferrexpo, the logical source.

In short, I believe that the company could do very well later this year, if a deal is agreed. The main reason why I think investors are overlooking the stock is that they either don’t feel a peace deal will be done, or that they think Ferrexpo has been weakened so much that it won’t be able to get back to pre-war levels. I agree these are risks going forward.

Pulling it all together

Ultimately, I think there’s too much pessimism surrounding the mining stock based on what could happen in the future. As a result, I’m seriously thinking about adding it to my portfolio. Granted, it’s a high-risk idea, but for investors who agree with my thinking, it could be worth considering.