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Valuation

• The process that links risk and return to determine the worth of an asset.

• The process of determining the current worth of an Asset or Security.

 
 Embedded terms in definition
 Asset
Return
Risk
Security
 
 Referenced Terms
 Book value per share: The amount per share of common stock that would be received if all of the firm's assets were sold for their exact book (accounting) value and the proceeds remaining after paying all liabilities (and preferred shares) were divided among the common shareholders.The ratio of stockholder equity to the average number of common shares. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting Valuation (and not necessarily market valuation).See Book Value.

 Constant growth model: Also called the Gordon-Shapiro model, an application of the dividend discount model which assumes (1) a fixed growth rate for future dividends and (2) a single discount rate.A widely cited dividend Valuation approach that assumes that dividends will grow at a constant rate that is less than the required return.

 Current price / current eps.: Comparing it to the average PE ratio shows over or under Valuation of the company. Divide the current PE by the five-year average PE. If the result is 1 or less, the stock is undervalued.

 Gordon model: A common name for the constant growth model that is widely cited in dividend Valuation.

 Hedge fund: Are alternative investment vehicles. Hedge fund trading styles are quite variable from one fund to another. Some are Macro Funds which place positions on movements in broad economic groups such as currencies, credit, equity and derivatives markets. Others are more focused on narrow Specialties, such as Convertible Securities or Mortgage Backed Securities. These funds operate as limited partnerships. There are limitations on the number of partners, minimum financial standards and commitments, and liabilities.A fund that may employ a variety of techniques to enhance returns, such as both buying and shorting stocks based on a Valuation model.

 
 Related Terms
 Constant growth dividend valuation gordon model
Dividend valuation model

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