How to Build a Comparable Company Analysis

A comparable company analysis values a business by looking at what similar public companies trade for. You pick a peer set, pull their trading multiples such as EV/EBITDA, EV/Sales, and P/E, then apply the median multiple to your target's financials to imply a value. It is a market based check on a DCF and a fast way to frame a valuation range.

How comparable company analysis works

The idea is relative valuation: if similar companies trade at a given multiple of EBITDA, your target should trade near that multiple too, adjusted for differences in growth, margins, and risk.

The output is a range, not a point. Applying the peer median multiple to the target gives an implied enterprise value, which you then bridge to equity value and per share. Because comps reflect current market sentiment, they capture pricing that a DCF can miss.

Worked example

Assume four peers with EV/EBITDA multiples of 8.0, 9.0, 9.5, and 11.0 times, giving a median of 9.25. Your target has EBITDA of 300 and net debt of 200.

1. List peer EV/EBITDA in C2:C5 and compute the median with =MEDIAN(C2:C5), which returns 9.25.
2. Apply it to the target: implied enterprise value =300*9.25 returns 2775.
3. Bridge to equity value: =2775-200 returns 2575.
4. Repeat for the 25th and 75th percentiles to frame a range, using =QUARTILE(C2:C5,1) and =QUARTILE(C2:C5,3).
5. Divide equity value by shares outstanding to reach an implied price per share.

Median multiple of 9.25 times EBITDA of 300 gives an implied enterprise value of 2775.

Laying out the comps tab

A clean comps tab makes the peer set, the multiples, and the summary statistics easy to audit.

• Choose peers in the same industry with similar size, growth, and margin profiles; explain any outliers.
• Pull EV/EBITDA, EV/Sales, and P/E so you can cross check across metrics.
• Use the median rather than the mean so a single extreme peer does not skew the result.
• Show minimum, median, and maximum so the reader sees the spread, not just the midpoint.
• Clean the tab before sending it so links and stray notes do not travel with the file.

Pitfalls

A poorly chosen peer set is the biggest risk. Including a high growth software name next to a mature industrial inflates the multiple and the implied value. Tighten the screen until the peers are genuinely comparable.

Stale or mismatched data is the other trap. Multiples must use consistent timing, such as forward EBITDA against forward enterprise value, and current share prices. Mixing trailing and forward figures across peers makes the median meaningless.