The main purpose of equity valuation is to estimate a value for a firm or security. A key assumption of any fundamental value technique is that the value of the security (in this case an equity or a stock) is driven by the fundamentals of the firm’s underlying business at the end of the day. There are three primary equity valuation models: the discounted cash flow (DCF), cost and comparable approaches. The comparable model is a relative valuation approach and is explained in more detail below.