Valuation Analysis
 |
Definition of 'Valuation Analysis'A form of fundamental analysis that looks to compare the valuation of one security to another, to a group of securities or within its own historical context. Valuation analysis is done to evaluate the potential merits of an investment or to objectively assess the value of a business or asset.Valuation analysis is one of the core duties of a fundamental investor, as valuations (along with cash flows) are typically the most important drivers of asset prices over the long term. |
 |
Investopedia explains 'Valuation Analysis'Valuation analysis should answer the simple, yet vital, question of, "What is something worth?" The analysis is then based on either current projections or projections of the future. While investors can agree on a metric like the current price-to-earnings ratio (P/E ratio), how to interpret a given valuation can and will differ among those same investors.Many types of valuation methods are used, involving several sets of metrics. For equities, the most common valuation metric to use is the P/E ratio, although other valuation metrics include: Price/Earnings, Price/Book Value, Price/Sales, Enterprise Value/EBIDTA, Economic Value Added and Discounted Cash Flow. |
Related Definitions
Articles Of Interest
-
How To Make A Winning Long-Term Stock Pick
Discover the key elements of a good long-term investment and how to find them. -
Relative Valuation Of Stocks Can Be A Trap
This method of valuing a company can make it look like a bargain when it is not. -
What Is The Impact Of Research On Stock Prices?
The answer to this question is directly related to the importance of information in the marketplace. -
8 Reasons M&A Deals Fall Through
Mergers and acquisitions can mean big success. But what about all the deals that fall through? -
Investment Valuation Ratios
Learn about per share data, price/book value ratio, price/cash flow ratio, price/earnings ratio, price/sales ratio, dividend yield and the enterprise multiple. -
How Risk Free Is The Risk-Free Rate Of Return?
This rate is rarely questioned - unless the economy falls into disarray. -
Yield Investing: Dividend, Earnings And FCF
There are numerous ways to value investments, and many investors prefer a specific valuation method. Yield investing is one way to value a stock by comparing the current price to various factors. ... -
Top 4 Most Scandalous Insider Trading Debacles
Here we look at some of the landmark incidents of insider trading. -
Warren Buffett: How He Does It
We look at the Sage of Omaha's methodology for evaluating value stocks. -
Nobel Winners Are Economic Prizes
Before you try to profit from their theories, you should learn about the creators themselves.
Free Annual Reports