Models of valuation

 

Models of valuation

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.

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