Stock Valuation Models and Relative Valuation in Equity

An absolute valuation model estimates intrinsic value based on past earnings, cash flows, and risk.

Valuation models should only be selected based on the company's dividend payouts.

Top-down forecasting starts with individual company analysis and then moves to industry forecasts and macroeconomic forecasts.

Understanding the business involves analyzing only financial statements and not other company disclosures.

Choosing a valuation approach that is consistent with the characteristics of the company being valued is not important.

Absolute Valuation Models estimate intrinsic value based on future earnings, cash flows, and risk.

Forecasting company performance usually involves a bottom-up approach from industry forecasts to macroeconomic forecasts.

Selecting the appropriate valuation approach does not depend on the availability and quality of the data.

Analysts should not consider the stability of a company's cash flows when choosing a valuation model.

The quality of a company's financial information, especially its earnings, is not important for understanding the business.