Relative Value

See: Relative Valuation Model.

Okay, what's Uncle Larry really worth?

Um, different relative.

The relative valuation model method basically just takes whatever a fair comparison is that relates to the company you're trying to value, and matches them in some form.

Example:

The S&P 500 is trading at 22x trailing earnings, but the Drone Index (high growth, high risk) is trading at 48x trailing earnings. Maybe "fair" is only 2x the S&P 500, growth rates and risk adjusted. So you might say "Hmm...at 48x it's overvalued, but at 44x it's about right, because that'd be 2 times the market." It's an odd way to value companies, but since there's no code of Hammurabi in unlocking the "right" price, this tool is useful as yet another datapoint somewhere along the highway.