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Relative Valuation
RAVI
Market approach
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Multiples can be misleading
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Relative vs. Fundamental Valuation
Relative valuation is based on P/E ratios and a host of other
“multiples”.
• Extremely popular with the press, CNBS, Stock brokers
• Used to value one stock against another.
• Can not compare value across different asset classes (stocks
vs. bond vs. real estate, etc).
• Can not answer the question is the “stock market over
valued?”
• Can answer the question, “I want to buy a tech stock, which
one should I buy?”
• Can answer the question, “Which one of these overpriced
IPO’s is the best buy?”
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