What is an 'Absolute Value'
An absolute value is a business valuation method that uses discounted cash flow analysis to determine a company's financial worth. The absolute value method differs from the relative value models that examine what a company is worth compared to its competitors. Absolute value models try to determine a company's intrinsic worth based on its projected cash flows.
BREAKING DOWN 'Absolute Value'
In addition to looking at ratios such as price to earnings and price to book value, value investors like to calculate what an entire business is worth when they are considering whether to buy a particular stock. Discounted cash flow models are one way to determine this worth. They estimate a company's future free cash flows, then discount that value to the present to determine an absolute value for the company. By comparing what a company's share price should be given its absolute value to the price the stock is actually trading it, investors can determine if a stock is currently under or overvalued.

Relative Valuation Model
A business valuation method that compares a firm's value to that ... 
Relative Value
A method of determining an asset's value that takes into account ... 
Discounting
The process of determining the present value of a payment or ... 
Present Value  PV
The current worth of a future sum of money or stream of cash ... 
Abnormal Earnings Valuation Model
A method for determining a company's worth that is based on book ... 
LargeValue Stock
A type of largecap stock investment where the intrinsic value ...

Investing
How To Choose The Best Stock Valuation Method
There is no single valuation tactic that works in every situation. But a companyâ€™s characteristics provide clues to investors about the best method to use. 
Investing
How To Choose The Best Stock Valuation Method
Don't be overwhelmed by the many valuation techniques out there  knowing a few characteristics about a company will help you pick the best one. 
Investing
What Is The Intrinsic Value Of A Stock?
Intrinsic value reduces the subjective perception of a stock's value by analyzing its fundamentals. 
Investing
What Is The Intrinsic Value Of A Stock?
Intrinsic value can be subjective and difficult to estimate. Itâ€™s a perception of a securityâ€™s value that factors tangible and intangible factors. 
Investing
Value Investing: Why Investors Care About Free Cash Flow Over EBITDA
Examine value investing philosophy and methodology to see why free cash flow is more important than EBITDA in pure intrinsic value calculation. 
Investing
Understanding Net Present Value
Learn how this value is used to determine the worth of a project. 
Trading
How to Identify Mispriced Stocks
Find out how to identify mispriced stocks. Learn about intrinsic and relative valuation methods based on fundamentals, and technical analysis. 
Investing
Equity Valuation In Good Times And Bad
Learn how to filter out the noise of the market place in order to find a solid way of determing a company's value. 
ETFs & Mutual Funds
Value Investing Strategies in a Volatile Market
Volatile markets are a scary time for uneducated investors, but value investors use volatile periods as an opportunity to buy stocks at a discount. 
Investing
DCF Vs. Comparables: Which One To Use
DCF and Comparables models are widely used in equity valuation. We explain the pros and cons of each method.

How can we find out whether stocks are overvalued or undervalued?
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How is perpetuity used in determining the intrinsic value of a stock?
Learn about the basics of a perpetuity, its valuation, how it is calculated and how it is used when evaluating the intrinsic ... Read Answer >> 
When and why should the terminal value be discounted?
Find out why investors use the terminal value, why the terminal value is discounted to the present day, and how it's related ... Read Answer >> 
Do you always have to consider intrinsic value when purchasing a stock? Why or why ...
Take a deeper look at why value investors consider a stock's intrinsic value an important consideration before picking a ... Read Answer >> 
What is the difference between intrinsic value and current market value?
Discover the differences between intrinsic and market values, what makes the former difficult to determine and how investor ... Read Answer >> 
Why is the time value of money (TVM) an important concept to investors?
Understand why the time value of money is an important concept for investors. Learn when present value and future value calculations ... Read Answer >>