Comparable Companies Analysis (Comps)
Definition
Comparable companies analysis ("trading comps") values a company by applying valuation multiples from similar publicly traded companies. Steps: select a peer set (similar industry, size, growth, margins, geography), spread their financials and compute multiples (EV/EBITDA, EV/Revenue, P/E), then apply an appropriate multiple range to the target's metrics to imply a valuation range.
Comps reflect current market pricing — a relative, market-based valuation. They do not include a control premium, so they typically imply a lower value than precedent transactions.
Judgment dominates the mechanics: peer selection, calendarization, cleaning metrics of non-recurring items, and choosing where in the peer range the target belongs (based on growth, margins, and risk) drive the answer.
Why interviewers ask
"Walk me through a comps analysis" and "what are the main valuation methodologies and how do they rank?" (typically precedents > DCF ≈ comps, though DCF ordering depends on assumptions) are guaranteed questions. Traps: sloppy peer selection logic, using equity value with unlevered metrics, and not adjusting for one-time items.
Related terms
Interviews don't test definitions — they test recall under pressure.
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