• The relative valuation model compares a firm’s value with that of its competitors to determine the firm’s financial value.
  • One of the most popular relative valuation multiples is the price-to-earnings ratio (P/E).
  • The relative valuation model is different from the absolute valuation model, which makes no reference to any other company or industry average.
  • A relative valuation model can be used to value a company’s stock relative to other companies or the industry average.