LSF Global
Apr 22
Demystifying Comparable Company Analysis
A Simplified Guide to Understand and Conduct Strategic Business Planning
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?
Determining a company's value isn't as straightforward as checking a price tag. That’s where a powerful technique called Comparable Company Analysis (often referred to as “Comps”) comes into play—a go-to tool used by investment bankers to assess what a company might be worth, based on how similar companies are performing in the market.
Determining a company's value isn't as straightforward as checking a price tag. That’s where a powerful technique called Comparable Company Analysis (often referred to as “Comps”) comes into play—a go-to tool used by investment bankers to assess what a company might be worth, based on how similar companies are performing in the market.
What Is Comparable Company Analysis?
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.
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.

Asset Allocation
Whether you are a seasoned investor or new to asset management concepts, this Asset Allocation Principles e-learning course promises to equip you with the insights and strategies necessary to navigate the intricate landscape of Asset Allocation successfully.
Empty space, drag to resize
When and Why Investment Bankers Use Comps?
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.
Step-by-Step Process of Performing Comps
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:
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:
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.
Here’s a simplified version of how Comps are typically performed:
- Identify the Target Company-
- 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-
- Calculate Valuation Multiples
- Compare and Apply-
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.
Real-World Example
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.
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.
Challenges and Limitations
While Comps is extremely useful, it’s not perfect. Here’s
what to keep in mind:
It’s best used alongside other valuation methods like Discounted Cash Flow (DCF) or Precedent Transactions for a fuller picture.
- 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.
Why Comps Still Matters?
Despite its imperfections, Comps remains a cornerstone of
investment banking because it:
It’s like using a compass—not perfect, but incredibly helpful in the right hands.
- 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.
Final Thoughts
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.
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.
Interested in a career in baking or finance?
Get expert guidance today - contact us now!
Thank you!
Important Links
Copyright © 2025