Comparable company analysis

Valuing a business by the multiples at which similar listed companies trade.

The method is fast, transparent and entirely dependent on the peer set, which is where the judgement lives. Comparability means similar economics rather than similar labels: growth rate, return on capital, margin structure and cyclicality matter far more than sharing an industry classification code.

Five to eight names is the practical range. Fewer and one outlier dominates; more and the set stops being comparable.

The output is a range, and the useful analysis is explaining where in the range the subject belongs and why. A company at the bottom of its peer range on every multiple either deserves to be there or is the opportunity, and only the fundamentals distinguish those.

Use the median, not the mean. One outlier should not set the answer.