What is the meaning of Valuation?

Valuation is the process of estimating the value, or worth, of an asset or investment. Sometimes it means determining a fixed amount, such as establishing the value of your estate after your death. Other times, valuation means estimating future worth. For example, fundamental stock analysts estimate the outlook for a company's stock by looking at data such as the stock's price-to-earnings (P/E), price-to-sales, and price-to-book (or net asset value) ratios. In general, a company with a high P/E is considered overvalued, and a company with a low P/E is considered undervalued. However, as the prices of many rapidly growing Internet stocks are moving skyward, often in the presence of little-or even no-earnings, many analysts are reconsidering the old valuation models and looking more closely at a company's long-term potential to develop its products and expand its markets.