A Market-based valuation is a form of
stock valuation
In financial markets, stock valuation is the method of calculating theoretical values of companies and their share capital, stocks. The main use of these methods is to predict future market prices, or more generally, potential market prices, and th ...
that refers to market indicators, also called extrinsic criteria (i.e. not related to economic fundamentals and account data, which are intrinsic criteria).
Examples of market valuation methods
Technical analysis
Technical analysis
In finance, technical analysis is an analysis methodology for analysing and forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and Quantitative analysis (finance), quantitati ...
is the most characteristic market-based method, although it focuses more on timing than pricing.
Also, rough market comparison tools such as the
PE ratio and the
PEG ratio The 'PEG ratio' ( price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share ( EPS), and the company's expected growth.
In general, the P/E ratio is ...
are used. More sophisticated forms of analysis (
fundamental analysis
Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements (usually to analyze the business's assets, Liability (financial accounting), liabilities, and earnings); health; and Competition, competitors an ...
,
quantitative analysis, and
behavioral analysis) use also some market criteria, such as the
risk premium
A risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. It is used widely in finance and economics, the general definition being the expected risky Rate of retur ...
or
beta coefficient.
Those criteria might be "tilted" in some valuation models in anticipation of their possible variation in the next future, or to adapt them to their historical statistical range or
mean
There are several kinds of mean in mathematics, especially in statistics. Each mean serves to summarize a given group of data, often to better understand the overall value (magnitude (mathematics), magnitude and sign (mathematics), sign) of a gi ...
.
See also
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List of valuation topics
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Price discovery
In economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the beha ...
*
Valuation using multiples
In economics
Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the beha ...
*
Valuation using discounted cash flows
Valuation using discounted cash flows (DCF valuation) is a method of estimating the current value of a company based on projected future cash flows adjusted for the time value of money.
The cash flows are made up of those within the “explici ...
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Valuation using the Market Penetration Model
External links
stock image and behavioral finance
Stock market
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