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As an investor, given your investment philosophy, time horizon and beliefs about markets (that you will...

As an investor, given your investment philosophy, time horizon and beliefs about markets (that you will be investing in), which of the approaches to valuation would you choose?

  1. Discounted Cash Flow Valuation
  2. Relative Valuation
  3. Neither. I believe that markets are efficient.
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Answer #1

I do not believe the market are efficient and there is always a difference between the value of a share and the price of the share so I would be using relative valuations like multiple ratios which would be combination of price to earning ratio and price to book values and comparing various ratios to the industry standards in order to finding out the standing of a particular company in the overall industry.

Relative valuation is a method in which the the price of a company and the statements of a company are compared to that of another company in the same industry as this believes in the law of One price, and it advocates that all the similar assets will be having similar prices so, I would be trying to finding out the undervalued company using the relative valuation method and I would be trying to capitalise between the value and the price of the company and make a high rate of return

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