Imagine you’re planning to buy a company, invest in a startup, or prepare your business to go public. One big question instantly pops up: What’s it worth?

Comparable Company Analysis (Comps) is a method of valuing a business by looking at how similar companies—those in the same industry, size range, and geography—are valued by the market.

Think of it like house hunting: when you're trying to set a price for your home, you check how much similar homes in your area recently sold for. Comps does the same for businesses, offering a market-based, data-driven way to estimate value.

It’s one of the most widely used valuation techniques in Investment Banking, especially during mergers and acquisitions, IPO pricing, and equity research.

Want to explore more on how financial experts break down such tools? Check out practical learning options on LSF Global iLearn.

Investment bankers rely on Comps when:

 A company is going public and needs to set a share price

 An organization is planning to acquire or merge with another

 Investors want to decide if a stock is fairly priced

 Businesses seek to raise capital and need to value themselves for investors

 Why use it? Because it’s:

 Quick and relatively easy to execute

 Objective, relying on current market data

 Realistic, reflecting actual investor sentiment

 Of course, it’s not without its limitations—but we’ll come to that soon.

Now that you know what Comparable Company Analysis is and why it’s used, let’s look at how it’s done in the real world. While the process may seem technical at first glance, breaking it down into clear steps makes it accessible and actionable.

Here’s a simplified version of how Comps are typically performed:

Identify the Target Company
Start by selecting the company you want to value—this becomes your benchmark for comparison.

Select a Peer Group
Choose public companies that operate in the same sector, with similar size, structure, and market conditions. These will be your comparables.

Collect Financial Data
Key metrics include revenue, EBITDA, net income, and earnings per share (EPS). The idea is to gather enough data to assess performance in parallel.

Calculate Valuation Multiples
 This includes metrics like EV/EBITDA, P/E ratio, and Price-to-Book. These multiples give insight into how the market is pricing similar businesses.

Compare and Apply
Once the multiples are established, apply the averages (or medians) to your target’s financials. This yields a valuation range that’s based on how comparable companies are performing.

To explore this process in depth, the Comparable Company Analysis Course on iLearn offers a guided, hands-on approach, with practical examples and industry-driven models. If you're serious about building financial acumen, this course is an excellent place to start.

The course dives deep into the core valuation metrics and multiple models through its comprehensive modules, including:

The Earnings Multiple Model

Gordon Growth Model and PE

 Equity Analysis PE Ratio and Comparable Valuation

 Equity Analysis PE Ratio and Fundamental Valuation

 Equity Analysis Stock Buybacks and the PE Ratio

 Equity Analysis Weighted Average Number of Shares

 Equity Analysis Diluted Earnings per Share (EPS)

 Equity Analysis Earnings per Share (EPS)

 Equity Analysis Book Value per Share

Equity Analysis Dividend per Share and Dividend Yield

Equity Analysis Price Earnings (PE) Ratio

Equity Analysis Price to Book Value per Share (PBVPS)

Equity Analysis Price Earnings Growth (PEG) Ratio

 Equity Analysis Price to Sales (PS) Ratio

Equity Analysis Price to Cash Flow Per Share (PCFPS)

 Equity Analysis Cash Flow per Share (CFPS)

 Enterprise Value

 Enterprise Value Analysis Basics

 Enterprise Value Analysis EV Sales

Enterprise Value Analysis Other EV Ratios

Corporate Valuation Issues in Comparable Analysis

Corporate Valuation Calculating Forecast PE Ratios

Corporate Valuation Comparable and Absolute Valuation

 Corporate Valuation Price to Book Ratio and ROE

 Corporate Valuation PE Relative

 Comparable Valuation The Discount for Liquidity

Each module builds a strong foundation in equity and enterprise valuation, helping learners understand not only how to calculate but also how to interpret and leverage these numbers in real business scenarios.

By completing this course, you’ll be equipped with the insights and tools that top-tier investment professionals use every day—minus the jargon overload.

Let’s say you're valuing a software company—Company X. You identify 4 other public companies in the same industry and size range. Their average EV/EBITDA multiple is 12x.

Company X has an EBITDA of $5 million.
Using the comps method:

Estimated Enterprise Value = 12 × $5M = $60 million

This gives you a benchmark valuation to work with, rooted in current market expectations.

While Comps is extremely useful, it’s not perfect. Here’s what to keep in mind:

No two companies are exactly alike—differences in management, operations, or geography can affect comparisons.

Market conditions can distort valuations—during a boom, all companies may look overpriced.

 Multiples fluctuate—they change with time, trends, and investor sentiment.

 It’s best used alongside other valuation methods like Discounted Cash Flow (DCF) or Precedent Transactions for a fuller picture.

Despite its imperfections, Comps remains a cornerstone of investment banking because it:

Provides a realistic view of how investors value similar companies

Offers quick results, making it useful for time-sensitive decisions

Is widely accepted and understood across financial sectors

It’s like using a compass—not perfect, but incredibly helpful in the right hands.

Understanding how to value a business is like learning a new language in finance—and Comparable Company Analysis is one of the first phrases you’ll want to master.

Whether you’re an aspiring analyst, finance student, or just curious about the world behind the numbers, building your understanding of Comps is a smart place to start. 

Want to explore more tools used by finance professionals?
Discover learning modules designed to develop practical skills on LSF Global iLearn and take the first step toward thinking like an investment banker.