What key input is required for both absolute and relative valuation methods?

The key input required for both absolute and relative valuation methods is short-term forecasts. In the context of valuation, short-term forecasts involve estimating future revenues, expenses, and cash flows over the next few years. These projections are critical because they supply the foundational data needed to assess a company's financial performance and determine its value.

For absolute valuation, methods such as discounted cash flow (DCF) analysis rely heavily on short-term forecasts to calculate the present value of future cash flows. Accurate short-term predictions directly influence the estimated intrinsic value of a company.

Relative valuation, on the other hand, often compares multiples derived from short-term forecasts, such as earnings or revenues, to those of comparable firms in the industry. This comparative approach hinges on the reliability of the short-term forecasts to ensure that the multiples yield a meaningful assessment of value relative to peers.

While past financial statements, industry comparisons, and long-term market trends can provide context and background for valuation, they do not serve as core inputs in the same direct manner as short-term forecasts. Past financial statements may reflect historical performance but do not account for expected future changes, industry comparisons may assist in providing relative insights but are influenced by the future potential captured in short-term forecasts, and long-term market trends may guide broader