Comparable Companies Analysis (Comps)

The peer group should include companies with similar business models, end markets, size, growth profiles, and margin structures. Start broad (same industry) then narrow based on revenue mix, geography, and growth rate. A typical comp set has 6–12 companies. The quality of your comps analysis depends entirely on peer selection — garbage in, garbage out.

The most common multiples are EV/EBITDA, EV/Revenue, and P/E. EV-based multiples are preferred because they are capital-structure-neutral. For high-growth companies with negative EBITDA, EV/Revenue is used instead. Industry-specific multiples also matter — EV/EBITDAR for airlines, Price/FFO for REITs, Price/Book for banks. Always use forward (NTM) multiples when available as they reflect expectations.

Spread the peer multiples (mean, median, 25th/75th percentile), then apply the relevant range to your target's financial metrics. For example, if the median peer EV/EBITDA is 10x and your target has $100M EBITDA, the implied enterprise value is $1B. Subtract net debt to get equity value. Present a range, not a point estimate. Comps are typically shown alongside DCF and precedent transactions in a football field chart.