What differentiates relative valuation from intrinsic valuation?

Relative valuation stands out by focusing on the comparison of similar assets' values to determine the worth of an asset. This approach leverages market data, typically examining how similar companies are valued to derive a valuation for the asset in question. This method is often represented through various ratios and multiples, like price-to-earnings or price-to-book ratios, making it easier to assess a company's relative performance within its industry or peer group.

In contrast, intrinsic valuation seeks to calculate the true value of an asset based on fundamentals, such as projected cash flows or the underlying financial health of the entity. It does not necessarily rely on peer comparisons, but instead on specific financial metrics and projections that reflect the asset's potential.

The other choices do not accurately reflect the distinct characteristics that set intrinsic and relative valuation apart. For instance, intrinsic valuation does not focus on comparing similar assets, rather it is concerned with the inherent value derived from an asset's cash flows and financial performance. Meanwhile, using market multiples is more of a characteristic of relative valuation rather than intrinsic valuation. Thus, the clear distinction of relative valuation's focus on comparing the values of similar assets is what makes it the correct choice.