Absolute Value

A business valuation method that uses discounted cash flow analysis to determine a company's financial worth. The absolute value method differs from the relative value models that examine what a company is worth compared to its competitors. Absolute value models try to determine a company's intrinsic worth based on its projected cash flows.

In addition to looking at ratios such as price to earnings and price to book value, value investors like to calculate what an entire business is worth when they are considering whether to buy a particular stock. Discounted cash flow models are one way to determine this worth. They estimate a company’s future free cash flows, then discount that value to the present to determine an absolute value for the company. By comparing what a company's share price should be given its absolute value to the price the stock is actually trading it, investors can determine if a stock is currently under or overvalued.


Investment dictionary. . 2012.

Look at other dictionaries:

  • absolute value — n. 1. the magnitude of a real number, disregarding its positive or negative sign [the absolute value of 4 or +4, written | 4| or |+4|, is 4] 2. the magnitude of a complex number; modulus …   English World dictionary

  • absolute value — value of a number expressed as a positive number (i.e. 23 has an absolute value of 23) …   English contemporary dictionary

  • Absolute value — For the philosophical term, see Value (ethics). For the Akrobatik album, see Absolute Value (album). In mathematics, the absolute value (or modulus) |a| of a real number a is the numerical value of a without regard to its sign. So, for example,… …   Wikipedia

  • absolute value — Math. 1. the magnitude of a quantity, irrespective of sign; the distance of a quantity from zero. The absolute value of a number is symbolized by two vertical lines, as |3| or | 3| is 3. 2. the square root of the sum of the squares of the real… …   Universalium

  • absolute value — ab′solute val′ue n. 1) the magnitude of a quantity, irrespective of sign; the distance of a quantity from zero. The absolute value of a number is symbolized by two vertical lines, as |3| or |−3| is three 2) the square root of the sum of the… …   From formal English to slang

  • absolute value — absoliučioji vertė statusas T sritis fizika atitikmenys: angl. absolute value vok. Absolutwert, m rus. абсолютное значение, n pranc. valeur absolue, f …   Fizikos terminų žodynas

  • absolute value — skaičiaus modulis statusas T sritis informatika apibrėžtis Matematinė sąvoka, reiškianti skaičiaus absoliutinę reikšmę |x|, kuri apibrėžiama taip: Iliustraciją žr. priede. Skaičiaus modulis visuomet didesnis arba lygus nuliui. Modulį galima gauti …   Enciklopedinis kompiuterijos žodynas

  • absolute value — noun Date: 1889 1. a nonnegative number equal in numerical value to a given real number 2. the positive square root of the sum of the squares of the real and imaginary parts of a complex number …   New Collegiate Dictionary

  • absolute value — noun a) For a real number, its numerical value without regard to its sign; formally, 1 times the number if the number is negative, and the number unmodified if it is zero or positive. b) For a complex number, the …   Wiktionary

  • absolute value — noun 1》 Mathematics the magnitude of a real number without regard to its sign. 2》 technical the actual magnitude of a numerical value or measurement, irrespective of its relation to other values …   English new terms dictionary

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