Comparable Company Analysis (Comps): A Practical Guide for Finance Professionals

What Is Comparable Company Analysis?

Comparable company analysis — commonly called comps — is a relative valuation method that values a business by comparing it to similar publicly traded companies. The underlying logic is that similar businesses should trade at similar multiples of their financial metrics. If a group of comparable companies trade at an average of 10x EBITDA, a similar private business should be worth approximately 10x its EBITDA.

The Key Trading Multiples

EV/EBITDA is the most widely used multiple in corporate finance. Enterprise value divided by EBITDA gives a capital-structure neutral multiple that works across companies with different debt levels. EV/EBIT is useful where depreciation differences between companies are significant. EV/Revenue is used for high-growth companies with no profit. P/E (price to earnings) is the most familiar multiple but is affected by capital structure and tax differences, making cross-company comparison less clean.

How to Select Comparable Companies

The quality of a comps analysis depends entirely on the quality of the peer set. Good comparables share: similar business model and products; similar size (revenue and enterprise value within 50-200% of the target); similar geography; similar growth profile; and similar margins. In practice, perfect comparables rarely exist — the art is selecting the best available set and making judgements about where the target sits within the range.

Building the Comps Table

For each comparable company, collect: share price and shares outstanding (to calculate market cap); net debt (to calculate enterprise value = market cap + net debt); revenue, EBITDA, and EBIT (last twelve months, current year estimate, and next year estimate). Calculate each multiple. Present as a table showing the range, 25th percentile, median, and 75th percentile for each metric.

Applying the Results

Apply the median multiple to the target's equivalent financial metric to get an indicative value. Apply the range to get a valuation range. Always cross-check against other methodologies — comps provides a market-derived reference point but must be considered alongside DCF analysis and, where relevant, precedent transaction multiples. Comps is a core skill for investment banking, M&A, and corporate finance roles, and is examined in the ACCA Advanced Financial Management (AFM) paper.