Valuation Model

Category: finance

A mathematical formula (e.g., DCF) used to estimate the intrinsic value of a company.

Valuation models are the "truth-seekers." Discounted Cash Flow (DCF) models, for instance, estimate all the future money a company will make and convert it to today’s dollars. If the model says $100 and the stock is $50, you buy. It’s the logic behind every smart trade.

Common Examples

• Our custom valuation model incorporates a 10-year growth forecast to determine the fair intrinsic price of the equity assets.
• The strength of an equity valuation model depends entirely on the accuracy of the underlying growth assumptions used by the analyst.