Relative Value Equity Valuation Approaches

Free CFA Level I lesson in Equity Investments. 14 min read, ~2,119 words.

Method of comparables benchmarks against peers. Method of forecasted fundamentals derives a justified multiple from a DCF or DDM model. Best practice uses both. Price multiples (P/E, P/B, P/S, P/CF) value equity directly. Enterprise value multiples (EV/EBITDA, EV/Sales, EV/EBIT) value the whole firm and work across capital structures. Trailing (TTM)...