Relative Value


DEFINITION of 'Relative Value'

A method of determining an asset's value that takes into account the value of similar assets. In contrast, absolute value looks only at an asset's intrinsic value and does not compare it to other assets. Calculations that are used to measure the relative value of stocks include the enterprise ratio and price-to-earnings ratio.

BREAKING DOWN 'Relative Value'

When value investors are considering which stocks to invest in, they do not just look at the financial statements of the companies whose stocks they are interested in buying to make sure that the company is profitable and well-managed and that the stock is underpriced. They also look at the financial statements of competing companies to assess the stock's value relative to its peers.

  1. Full Value

    The total worth of a financial instrument or organization. Full ...
  2. Perceived Value

    The worth that a product or service has in the mind of the consumer. ...
  3. Relative Strength

    A momentum investing technique that compares the performance ...
  4. Extrinsic Value

    The difference between an option's market price and its intrinsic ...
  5. Intrinsic Value

    Intrinsic value is the actual value of a company or an asset ...
  6. Price-Earnings Relative

    A price-earnings ratio of a stock divided by the price-earnings ...
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