Walk me through a trading comparables analysis.
Whether you know the full process — from picking peers to drawing a conclusion — not just "take the average multiple".
Answer it out loud firstTake 30–60 seconds, as you would in the room. Then compare with the model answer.
Show the model answer
Pick a set of listed companies similar to the target in business, size, growth and geography. Gather their share prices, diluted shares, debt and cash, and consensus forecasts. Calculate their equity and enterprise values and clean the financials. Compute the relevant multiples, look at the median and the range, and apply that range to the target's figures to get a valuation range — cross-checked against other methods.
The full answer
- Select the peers: same industry and business model, then narrow on size, growth, margins, end markets and geography. Usually 5–15 companies, sometimes in tiers.
- Gather the data: share price, diluted shares (treasury method), latest balance sheet for debt, cash and minorities, and consensus forecasts for the next two to three years.
- Normalise: strip out one-offs, calendarise to a common year-end, align accounting (leases, capitalised costs).
- Compute multiples: EV/revenue, EV/EBITDA, EV/EBIT, P/E — plus sector-specific ones.
- Analyse: median, mean, high and low; explain outliers; relate multiples to growth and margins.
- Apply: pick a range (for example the interquartile range, adjusted for where the target sits) and multiply by the target's metrics. Convert EV to equity value per share.
Comps tell you what the market pays today for a minority stake. For a sale of control, compare with precedent transactions; for intrinsic value, with a DCF.
Mistakes to avoid
Applying a single average multiple with no judgement on where the target should sit.
Mixing EV multiples with equity metrics.
Follow-ups they may ask
Log in to keep track of the questions you’ve mastered.