What is market-based valuation?

Market-based valuation is a type of stock valuation method that speaks to market indicators. This is a well known way of calculating the theoretical value of a company and its stock.

Where have you heard about market-based valuation?

Many investors and analysts recommend carrying out some level of market-based valuation before deciding to invest in a company, and it’s possible you may have done it in some way yourself. For example, examining the selling price of similar items could be seen as a form of market-based valuation.

What you need to know about market-based valuation.

The most distinctive market based method is technical analysis, even though it concentrates more on timing than actual price. There are also market comparison tools that are used, such as the PEG ratio and the PE ratio tools. Analysis forms such as behavioural, fundamental and qualitative analysis can sometimes use market criteria like the risk premium of the beta coefficient. Value, fair value, intrinsic value, ‘the theory of investment value’ and tax amortisation benefit are all various types of valuation.

Find out more about market-based valuation.

If you are interested in market-based valuations, take a look at our page on discounted cash flow.