Valuation is the process of estimating the value, or worth, of an asset or investment.
Sometimes it means determining a fixed amount, such as establishing the value of your estate after your death. Other times, valuation means estimating future worth.
For example, fundamental stock analysts estimate the outlook for a company's stock by looking at data such as the stock's price-to-earnings (P/E), price-to-sales, and price-to-book, or net asset value, ratios.
In general, a company with a high P/E is considered overvalued, and a company with a low P/E is considered undervalued.
- Browse Related Terms: Alpha, Book value, Dividend yield, Earnings estimate, Earnings momentum, Earnings surprise, Forward price-to-earnings ratio, Multiple, Outstanding shares, Price-to-book ratio, Price-to-earnings ratio (P/E), Price-to-sales ratio, Quarter, risk ratio, Special situation, Undervaluation, valuation, Value stock, Whisper number, Zacks Investment Research
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