1. Estimated Value and Market Price
a. evaluate whether a security, given its current market price and a value estimate, is overvalued, fairly valued, or undervalued by the market;
b. describe major categories of equity valuation models;
What are the three major categories of equity valuation models?
1. Present value models. Both dividend discount models and free-cash-flow-to-equity models belong to this category.
2. Multiplier models. These are relative valuation models.
3. Asset-based valuation models. These are based on the book value of assets and liabilities.