TRADITIONAL VALUATION METHODS
Despite their differences, both expectational and valuation models are ultimately trying to do the same thing: Identify those companies for which the current expectations built into today’s stock price are wrong. Traditional equity valuation models and methods are simply systematic ways of trying to make that identification.
The four primary traditional methods for equity valuation use the price-to-book ratio (P/B), price-to-sales ratio (P/S), price-to-earnings ratio (P/E), and the dividend discount model (DDM).
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