Valuation

AAA

DEFINITION of 'Valuation'

The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.

INVESTOPEDIA EXPLAINS 'Valuation'

For example, an analyst valuing a company may look at the company's management, the composition of its capital structure, prospect of future earnings, and market value of assets.

Judging the contributions of a company's management would be more of a subjective valuation technique, while calculating intrinsic value based on future earnings would be an objective technique.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Earnings Power Value - EPV

    A technique for valuing stocks by making an assumption about ...
  3. Asset-Based Approach

    A type of business valuation that focuses on a company's net ...
  4. Royal Institution Of Chartered ...

    One of the world's leading professional bodies for qualifications ...
  5. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  6. Intrinsic Value

    1. The actual value of a company or an asset based on an underlying ...
RELATED FAQS
  1. What does free cash flow to equity (FCFE) really tell an analyst?

    Investors are keen to find the right set of metrics to evaluate the performance and likely growth of a company. Free cash ... Read Full Answer >>
  2. How do capital expenditures affect (CAPEX) the valuation of a company?

    The effects of capital expenditures, or CAPEX, on a company's valuation depend largely upon the category of CAPEX the company ... Read Full Answer >>
  3. How does an IPO get valued? What are some good methods for analyzing IPOs?

    The price of a financial asset traded on the market is set by the forces of supply and demand. Newly issued stocks are no ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.
  2. Investing

    Using DCF In Biotech Valuation

    Valuing firms in this sector can seem like a black art, but there is a systematic way to pin a price on potential.
  3. Investing

    How An IPO Is Valued

    The initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
  4. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  5. Bonds & Fixed Income

    Equity Premiums: Looking Back And Looking Ahead

    If stocks become less profitable in the future, you may have to change your investment strategy.
  6. Investing

    Finding Profit In Troubled Stocks

    Find out the difference between a company capable of surviving a share-price beating and one that cannot.
  7. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  8. Charts & Patterns

    Why These Could Be 2015's 10 Best Biotech Stocks

    A quick look at a 10 biotech companies that are poised to deliver for shareholders in 2015.
  9. Charts & Patterns

    Why These Could Be 2015's 10-Best Media Stocks

    A list of top-tier and speculative media stocks for 2015.
  10. Stock Analysis

    Is This Dividend Stock A Value Or Value Trap?

    We can say that Fifth Street Finance has had a rough year, but there's a huge difference between an undervalued stock and a stock that's cheap for a reason

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center