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Comparable Company Analysis

-It is a relative form of valuation that looks at ratios of similar public

companies and uses them to derive the value of another business.
-Company's value is based on what other similar companies are worth.

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Steps in Performing Comparable Company Analysis
1. Find the right comparable companies
2. Gather financial information
3. Set up the comps table
4. Calculate the comparable ratios
5. Use the multiples from the comparable companies to value the company in question

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Step 1: Find the right comparable companies

Search for companies that operate in the same industry and that have similar
characteristics.
Criteria:
-Industry classification
-Geography
-Size (revenue, assets, employees)
-Growth rate
-Margins and profitability

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Example:
Kris Tea Co. is a herbal tea manufacturer located in the Philippines. For the past
12 months, the company was able to generate sales from 1.5M to 2M with a total
assets ranging from 180M to 250M and an average growth rate of 13%.

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Step 2: Gather financial information
The information you need will vary widely by industry. For mature businesses, you
will look at metrics like EBITDA and EPS, but for earlier stage companies you may
look at Gross Profit or Revenue.

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Locate the necessary information such as:
Company name
Share price
Market capitalization
Net debt
Enterprise value
Revenue
EBITDA
EPS
Analyst estimates

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Step 3: Set up the comps table
Create a table that lists all the relevant information about the companies you’re
going to analyze