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   What is the Relative Valuation Model (RV)?
 
   The Relative Valuation (RV) model is a percentile (1-100) ranking of stocks based on price and enterprise value multiples.

Higher scores indicate the best value stocks, and correspond to the stocks with the highest yields. A score of 95 on the model's P/E Component, for example, means that the security has an earnings yield higher than roughly 95% of its peers.

RV is highly predictive of relative price movement and is effective across stocks in each capitalization category, investment style, and market sector.

The overall score for a given stock is a blend of its scores on each component. The weight on each component in the overall score varies according to industry- and stock-specific factors that capture key fundamental insights.

The headline RV model score featured in StarMine Professional is the Regional Rank, in which a given stock is ranked against all others in its Region. The RV Global, Sector, and Industry ranks are also available.

The Relative Valuation model features six prominent valuation measures that are relevant to most securities: EV/Sales, EV/EBITDA, P/E, Price/CFO, Price/Book, and Dividend Yield. For companies that do not pay dividends, the model also considers share buyback activity.

The model blends forward and trailing values smoothly such that it provides a fair comparison across stocks with varying levels of coverage. The distribution of weight across F12M and T12M values is based on analysts' ability to forecast the measure in question. More weight is assigned to forward yields on measures for which analyst estimates tend to be relatively reliable.

F12M values utilize StarMine's SmartEstimates where available; if a SmartEstimate is not available, a consensus estimate is used instead.

Although RV is a proprietary model, you can observe the key drivers on a stock by looking at individual valuation components. For more detailed information model components, please see the "Relative Valuation Model" section of the online Help for the Ticker|Valuation - Relative page.



See also:
Ticker|Valuation — Relative
What is a SmartEstimate?


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