November 2015
Intermediate to advanced
514 pages
17h 1m
English
Relative valuation involves the use of similar comparable assets in valuing another asset. Relative valuation is also known as comparable valuation. Price earnings (P/E) ratio is the most commonly used relative valuation measure in industry. In relative valuation, the benchmark might be the multiple of a similar company or the median average value of the multiple for a peer group companies, an economic sector, an equity index or median, or an average own past value of the multiple. Empirical research advocates the use of forward-looking multiples as they are considered to be more accurate predictors of value. The process of relative valuation starts with the selection of a peer group. Peer group selection is based ...