Valuation: Comps & Precedents
Why do we use a SET of comparable companies rather than just one or two?
Model answer
A single peer can be distorted by company-specific factors - a pending acquisition, an earnings miss, an unusual capital structure, or thin liquidity - so its multiple may not be representative.…
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More from Valuation: Comps & Precedents
- What are the main valuation methodologies?
- Why might trading comps and precedent transaction comps give different values?
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- Walk me through how you perform a comparable companies analysis.
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