Relative Valuation Model

Filed Under » , ,
Dictionary Says

Definition of 'Relative Valuation Model'

A business valuation method that compares a firm's value to that of its competitors to determine the firm’s financial worth. Relative valuation models are an alternative to absolute value models, which try to determine a company's intrinsic worth based on its estimated future free cash flows discounted to their present value. Like absolute value models, investors may use relative valuation models when determining whether a company's stock is a good buy.
Investopedia Says

Investopedia explains 'Relative Valuation Model'

Relative valuation is not as straightforward as it might appear on the surface. Which companies are chosen as comparable companies and which multiples are used to determine value will have a significant outcome on a company's relative valuation. When performing a relative valuation, a company's sector should be used to determine the most logical multiple to use. For example, price to cash flow for real estate and price to sales for retail.
Search results for

'Relative Valuation Model'

  • The Fed Model And Stock Valuation: What It Does And Does Not Tell ...

    http://www.investopedia.com/articles/03/112703.asp
    ... dubbed it the "Fed's stock valuation model, though no ... ever officially endorsed it."
    This model compares two ... regarding what works best for relative comparisons. ...

  • How To Choose The Best Stock Valuation Method

    http://www.investopedia.com/articles/fundamental-analysis/11/choosing-valuation-methods.asp
    ... two main categories: absolute and relative valuation models. ... Valuation models that
    fall into this category include the dividend discount model, discounted cash ...

  • Relative Valuation: Using Stocks To Value Other Stocks

    http://www.investopedia.com/articles/stocks/11/relative-valuation-stocks-valuing-stocks.asp
    ... comparing margins or other ratio would be ineffective since the business model is
    different. The first step in ensuring an effective relative valuation is to ...

  • Relative Valuation Of Stocks Can Be A Trap

    http://www.investopedia.com/articles/fundamental/03/111203.asp
    ... Kmart investors failed to see that the business's model was fundamentally ... affect
    the firms' multiples need to be thoroughly analyzed in relative valuation. ...

  • Top 3 Pitfalls Of Discounted Cash Flow Analysis

    http://www.investopedia.com/articles/07/DCF_pitfalls.asp
    ... In contrast, the DCF model discount rate is always theoretical and we do not really
    have any ... For related reading, see Relative Valuation: Don't Get Trapped. ...

  • Breaking Down The Fed Model

    http://www.investopedia.com/articles/stocks/08/fed-model.asp
    ... cheaper stocks are supposed to be relative to bonds ... This valuation suggests a falling
    bond yield dictates a ... undervalued according to the Fed Model (or interest ...

  • Rackspace Has Already Racked Up A Demanding Valuation

    http://stocks.investopedia.com/stock-analysis/2012/Rackspace-Has-Already-Racked-Up-A-Demanding-Valuation-RAX-AMZN-GOOG-HPQ-MSFT0216.aspx
    ... it's difficult to build any sort of model that makes ... Valuation won't matter so long
    as the growth stays ... (For related reading, see Relative Valuation Of Stocks ...

  • How To Value A Real Estate Investment Property

    http://www.investopedia.com/articles/mortgages-real-estate/11/valuing-real-estate.asp
    ... Into The Dividend Discount Model.) Finding a Property's Income-Generating Capacity.
    The gross income multiplier approach is a relative valuation method that is ...

  • DCF Analysis: Pros & Cons Of DCF | Investopedia

    http://www.investopedia.com/university/dcf/dcf5.asp
    ... (To learn more, see Relative Valuation: Don't Get Trapped.). Unlike standard valuation
    tools such as ... Best of all, you can also apply the DCF model as a sanity ...

  • Valuing A Company Using The Residual Income Method

    http://www.investopedia.com/articles/fundamental-analysis/11/residual-income-model.asp
    ... One could opt to use a relative valuation approach, comparing ... One absolute valuation
    method which may not be so ... basics behind the residual income model and how ...

Related Articles

Bank Rates
Product Today Last Wk
$10K MMA 0.50% 0.51%
MMA 0.45% 0.46%
6 Month CD 0.46% 0.47%
1 Year CD 0.70% 0.75%
5 Year CD 1.46% 1.46%
1 Year Jumbo CD 0.66% 0.67%
Rate data provided by Bankrate
Product Today Last Wk
$30K HELOC 4.59% 4.60%
$30K Home Equity Loan 5.74% 5.77%
$50K Home Equity Loan 5.45% 5.50%
$50K HELOC 4.24% 4.24%
$100K Home Equity Loan 5.41% 5.46%
$100K HELOC 4.13% 4.13%
Rate data provided by Bankrate
Product Today Last Wk
30 Year Fixed 3.80% 3.80%
15 Year Fixed 3.09% 3.11%
1 Year ARM 3.54% 3.53%
30 Year Fixed Jumbo 4.38% 4.38%
5/1 ARM 2.65% 2.69%
3/1 ARM 2.69% 2.69%
Rate data provided by Bankrate
Product Today Last Wk
60 Month Used Car Loan 4.51% 4.51%
48 Month Used Car Loan 4.35% 4.35%
48 Month New Car Loan 3.24% 3.24%
36 Month Used Car Loan 4.34% 4.36%
36 Month New Car Loan 3.11% 3.13%
60 Month New Car Loan 3.35% 3.34%
Rate data provided by Bankrate
Partner Links