Comparable Company Analysis

The value of the company is an important factor in various significant decisions that the owners and management take.

Comparable Company Analysis (CCA) is a widely used valuation technique that assesses a company’s value by comparing it to similar businesses within the same industry. For example, an investment banker will get comparables that consist of many groups to be used to determine the metrics and valuation multiples of their target investment.

The trends shaping CCA highlight a move towards enhanced data quality, a focus on growth metrics, sector-specific customization, and integration with other valuation methods. This article helps you learn more about the CCA methodologies and potential risks and challenges.

What Is a Comparable Company Analysis?

There are many types of methods to value a company. Investors and businesses choose the best one that is suitable for them, specific to information on their company or investment. By studying various businesses similar to the company you need to value, you can determine the net value of it.

The Comparable Company Analysis is based on the assumption that companies that are similar in size, industry, and stature will be valued the same way. But, the main thing to keep in mind here is that this method will give the investor an estimate close to the value, in other cases the valuation can be significantly different from the real value.

Let us take an example to understand this better. If the share price of a company is currently $100, is it the real value of the share? Is the share truly worth $100 or $200 or $40? Or maybe the share is worth something else.

Why use Comparable Company Analysis?

Out of all the methods out there, investors choose the comparable company analysis method because it is easy to use, as the data required for estimating the value is widely available. This is only so for the companies that are publicly traded, as all the information is publicly available.

This method assumes that the market is pricing the securities of other businesses efficiently. Companies give you a good range for the valuation while other methods of valuation are dependent on a long list of assumptions, such as the discounted cash flow.

All these factors contribute to making the comparable company analysis the best and most commonly used. The comparable company analysis is used by people such as research analysts, investors (private equity), investment bankers, and other types of analysts.

Best Tools for Comparable Company Analysis?

Eqvista

Eqvista’s Company Comparable tool delivers NASDAQ-level precision for public multiples (EV/EBITDA, P/E) across thousands of peers, seamlessly blending them into cap table waterfalls, 409A valuations, and fairness opinions, making it perfect for startups and investor relations without the enterprise complexity. 

Unlike cost-prohibitive players, its free tier with pro upgrades offers intuitive screening, exportable reports, and AI-driven insights for over $270B in assets valued, empowering Eqvista users like you with tailored equity workflows.

Bloomberg Terminal

Bloomberg Terminal delivers real-time peer screening via RV and COMP functions, covering 60k+ equities, with graphing capabilities, ideal for trading desks needing intraday multiples. However, its $25k–$32k annual cost per user, steep learning curve, and lack of native cap table integration make it overkill for startups, unlike Eqvista’s free, intuitive Company Comparable tool that blends public comps with equity management for 409A valuations at zero overhead.

S&P Capital IQ

S&P Capital IQ shines with screening across 60k+ publics/10k+ privates, Excel plug-ins for multiple export, and 500k+ deal comps database, suiting PE and M&A pros. At $15k–$30k per user per year, it demands enterprise budgets and ignores startup-specific needs like real-time cap table waterfalls, Eqvista fills this gap affordably by integrating NASDAQ-precision comps directly into your equity workflows.

Advantages and Disadvantages of Comparable Company Analysis

The Comparable Company Analysis has many benefits that investors benefit from such as:

• Easy communication
• Benchmarks for the possible valuation multiples
• Easy calculation
• Data is available widely

But this process also has disadvantages, some of them are:

• It is easily influenced by non-fundamental factors
• Data not easily available for private companies
• It can be difficult for you to find the correct data for your company to compare due to many reasons
• This method is not useful for business that has a few or no comparable companies

Comparable Company Analysis Method

Once you understand what is comparable company analysis, the next step is to understand how to do it. Here we will go through steps to create the table. This will be essential as this will provide you with the data for comparing in order to estimate the value. This process is commonly performed by analysts, investment bankers, corporate developers, equity researchers, or even investors in private equity. Here are the comparable company analysis steps:

Source: Company annual filings and financial databases. Data as of respective fiscal year-ends (2016–2020). Figures are illustrative and for educational purposes only.

#1 Analyze the target company

This is one of the hardest steps of this process as it is mainly subjective. An analyst will gather all the information on the related company from financial data platforms (e.g., Bloomberg, FactSet, Yahoo Finance), company investor relations pages, and stock exchange filings, this will help you to get an industry classification and a detailed description, this will help you in the later stages to choose comparable companies that have the same features as your company.

Then the next thing to do is to search for businesses that are in the same industry and that have characteristics similar to yours. The more similar the better it will be for your valuation. The analyst who is doing this process will run a criterion and will go through a screening. The screening process will include:

• Geography
• Growth rate
• Size
• Profitability
• Industry classifications
• Margins

#2 Set comparable criteria

Once you have found the companies that are similar and relevant to your target company, you need to then gather all the information on their financials. The information of these companies can be derived online from various websites. The required information will depend on the stage of the business in the lifecycle and the industry.

If the companies that you are comparing are mature, then the information you will require is the EPS and the EBITDA. In the case of companies that are not mature, you will have to look at the revenue or their gross profit.

#3 Find and select the right comparable companies – create a peer group

Once you have gathered the relevant data on the companies that are similar to your target company, you will have to select the right ones out of the list that is the most similar. Once you have selected similar companies, create a peer group with all the data of these companies.

#4 Collect necessary financial data

Once you have found all the right comparable companies you will have to create a table and input all the information that you have gathered. This will help you analyze them. The required data that will be in the table for comparing are:

• Company name
• EPS
• LTM EBITDA
• LTM Revenue
• Net Debt
• Analyst estimates
• Share price
• Value of the Enterprise
• Enterprise Value (EV / TEV)

Key Terms Used in This Analysis:

• TEV / Enterprise Value (EV) = Market Capitalization + Net Debt (Total Debt − Cash)
• MVIC (Market Value of Invested Capital) = Market Value of Equity + Market Value of Debt
• These terms are used interchangeably in this article where Cash is assumed to be minimal.

Peer Group Financial Data (Figures in $ Thousands)

#5 Calculate multiples of comparable company

With all the required information in one place, the analyst now needs to start to calculate the relevant ratios. These ratios will be used to estimate the targeted company’s value.

Enterprise Value (EV) Multiples (numerator and denominator are both available to all capital providers and debt + equity):

• EV/Revenue: Enterprise value-to-revenue ratio
• EV/Gross Profit: Enterprise value-to-gross profit ratio
• EV/EBITDA: Enterprise value-to-EBITDA ratio
• EV/EBIT: Enterprise value-to-EBIT ratio

Equity Value Multiples (numerator and denominator relate only to equity shareholders):

• P/E: Price-to-earnings ratio
• P/B: Price-to-book ratio (primarily used for financial institutions such as banks and insurance companies)
• P/NAV: Price-to-net asset value ratio (primarily used for real estate investment trusts/REITs)

#6 Applying multiples to the target company

The analyst here will need to apply the multiples to the target company’s key financial data in order to calculate the value. The recommended way to apply the range of multiples are:

• Target company’s historical financial data such as LTM Sales, LTM EBITDA, LTM EBIT, and LTM Net Income.
• The projected (forward/NTM) data of the target company, usually prepared by the company’s management or external analysts.

#7 Determine the valuation

Generally, an analyst will take the comparable company’s median or the average of the multiples and apply them to the EBITDA, gross profit, net income, revenue, or the metrics included in the table.

For the analyst to come up with a meaningful average, they will remove the outliers and massage the numbers till they look realistic or relevant. Let us take an example.

If the group of comparable companies has an average MVIC/EBITDA of 12.67x, the analyst will multiply the target company’s EBITDA by 12.67 to calculate the implied MVIC (total invested capital value).

How to Interpret the Company Analysis Table

After you have completed the table and finalized the numbers, you will have to interpret the results. There are many ways to use this information. One way this data can be viewed is by looking at the under and overvalued businesses. Since the data does not consist of the qualitative factors of the business, the results have to be studied carefully in order to uncover the available opportunities.

In order for you to evaluate the numbers accurately in the business, you need to first understand what they stand for. Let us take an example here: We need to understand why XYZ Ltd. traded at a discounted EV/EBITDA multiple to ABC Ltd.

Is this so because it is undervalued and is a good opportunity to buy? Or maybe it has a low growth rate with high capital expenditure. This is where the analyst will have to look at all the details in depth and analyze them. Let us take another example:

Valuation Multiples

Let us use this example in order to understand and read the table. The main aim here is to understand what price point we should invest in. It is clear from the above table that:

• The companies are trading on an average MVIC/Sales of 4.74x
• We note that Company X’s MVIC/Sales is at 1.40x, which is lower than the average
• The lowest MVIC/Sales multiple among peers is 1.29x (Avid Technology)
• From the financial model, we take note that the EBITDA is positive and we can use the MVIC/EBITDA as a valuation tool
• MVIC/EBIT and MVIC/Sales can also be used as valuation tools
• A wide multiple range (1.29x to 10.75x in MVIC/Sales) indicates high variance among peers. Analysts should investigate whether Adobe (10.75x). A high-growth software company is a true comparable for Company X, and consider removing it as an outlier to arrive at a more accurate median.

Implied Valuation of Company X

Based on the three multiples, Company X’s implied MVIC ranges from approximately $22.6 million to $25.3 million, with a midpoint of approximately $23.9 million. Since Company X’s current MVIC is $7,000,000, it appears significantly undervalued relative to its peers.

Get Your Company Valuation from Eqvista

Comparable Company Analysis offers a practical, market-driven approach to valuing businesses by benchmarking against similar public companies, providing clear multiples like EV/EBITDA for informed decision-making. While it excels in simplicity and data availability for public firms, its limitations such as challenges with private companies or unique business models, highlight the need for complementary methods like DCF.​

Ready to streamline your CCA process? Eqvista’s Company Comparable tool delivers precise valuations, real-time insights, and seamless integration with cap table management, empowering startups and investors with NASDAQ-level precision across over $270 billion in assets. Start your valuation today.