{"concept_id":"ALTSS-VAL-011","slug":"comparable-company-analysis","canonical_name":"Comparable Company Analysis","aliases":["trading comparables","comps","public comps","guideline public company method"],"kind":"process","authority":"industry","facets":["VAL"],"domains":["VALUATION"],"display_title":"Comparable Company Analysis (Trading Comps)","search_aliases":["what is comparable company analysis","trading comps valuation","how to choose comparable companies","comps vs precedent transactions","comparable company analysis private equity","guideline public company method"],"one_sentence_definition":"Comparable company analysis is a relative valuation method that applies multiples of similar listed companies, such as enterprise value (EV) to EBITDA, to the subject company's own metrics, adjusted for differences in growth, risk and size.","plain_english":"If similar listed companies are worth about nine times their operating earnings, a private company with comparable prospects is probably worth something similar, before adjusting for the ways it differs. Comparable company analysis turns that intuition into a procedure: pick the peers, measure their multiples on a consistent basis, decide where the subject sits among them, and apply the result.","parent_concepts":[],"child_concepts":[],"related_concepts":["ev-ebitda-multiple","precedent-transactions","enterprise-value","calibration","revenue-multiple","fair-value","discounted-cash-flow","multiple-expansion","ipev-valuation-guidelines"],"comparison_concepts":[],"not_the_same_as":[{"slug":"precedent-transactions","distinction":"Precedent transactions use prices paid for whole companies, including control premiums; trading comps use listed minority share prices."},{"slug":"discounted-cash-flow","distinction":"A discounted cash flow (DCF) analysis values a business from its own projected cash flows and a discount rate; comps value it relative to market prices of similar businesses."},{"slug":"ev-ebitda-multiple","distinction":"EV/EBITDA is one multiple a comps analysis may use; comparable company analysis is the method."}],"formula_ids":["F-VAL-011-multiple-based-value"],"worked_examples":[{"title":"Illustrative peer set and a private subject ($ millions)","paragraphs":["Five listed peers trade at 8.2x, 9.0x, 9.6x, 10.4x and 12.1x last-twelve-months (LTM) EBITDA. The median is 9.6x; the mean, pulled up by the 12.1x outlier, is 9.9x. The subject has LTM EBITDA of $30m and is judged comparable to the middle of the group, so 9.6x gives enterprise value of $288m. With debt of $100m and cash of $10m, equity value is **$198m**. If the subject were smaller and slower-growing than every peer, the valuer would justify a multiple below the median rather than take the median by default."],"calc":{"fn":"enterprise_to_equity","inputs":{"enterprise_value":288,"debt":100,"cash":10},"expected":{"equity_value":198,"net_debt":90},"tol":0.0005}}],"sections":[{"heading":"Steps","paragraphs":["1. **Choose the peer set.** The [IPEV Valuation Guidelines](/glossary/ipev-valuation-guidelines) look for companies similar in risk and earnings growth, which is more likely when business activities, markets served, size, geography and tax rate are similar. Once chosen, the set should be kept stable unless new market information justifies a change.\n2. **Measure peers consistently.** Compute [enterprise value](/glossary/enterprise-value) at the measurement date and use metrics for the same period and accounting basis (research and development costs can be treated differently under International Financial Reporting Standards (IFRS) and US accounting standards, and changes to lease and revenue-recognition standards took effect at different times).\n3. **Compute and inspect multiples.** Look at the range, outliers and the reasons behind them.\n4. **Select and adjust.** Place the subject within the range for differences in size, growth, margin stability, customer and product concentration, reliance on key people, leverage and the liquidity of the holding.\n5. **Apply to maintainable earnings.** Use a metric adjusted for one-off items and pro forma for acquisitions and disposals, and make the same adjustments to the peers.\n6. **Bridge to equity and allocate.** Deduct debt and other senior claims and apportion the result among the subject's instruments."]},{"heading":"Choosing the multiple","paragraphs":["Where EBITDA multiples are available they are commonly the first choice (see [EV/EBITDA multiple](/glossary/ev-ebitda-multiple)). EBITDA ignores depreciation and amortisation, so it flatters capital-intensive or acquisitive businesses unless the valuer allows for their real costs. P/E multiples work only when the peers and the subject have similar borrowing and tax positions. For businesses with established operations but no sustainable profit yet, a [revenue multiple](/glossary/revenue-multiple) based on normalised margins can be used. Industry benchmarks such as price per subscriber are best treated as a cross-check."]},{"heading":"Trading comparables versus transaction comparables","paragraphs":["Trading comparables come from listed share prices. [Precedent transactions](/glossary/precedent-transactions) come from acquisitions of whole companies and include a premium for control. Transaction data are often weaker: little forward-looking information, less reliable private-company earnings, prices that may be stale or undisclosed, and deal-specific factors. The IPEV Guidelines leave it to the valuer's judgement whether transaction multiples, trading multiples or a combination best reflects market participant views, and caution against relying on even recent transaction multiples when markets are moving fast."]},{"heading":"Comparables in fair value measurement: calibration","paragraphs":["For fair value, the multiple implied by the entry price (when that price was fair value) is compared with peers' multiples at the same date. The gap captures differences in growth, risk, control and liquidity without measuring each one separately. At later dates the valuer moves the subject's multiple in line with peers, using judgement about whether the gap should persist, narrow or widen ([calibration](/glossary/calibration)). The method presumes that listed peers are fairly priced and that their multiples indicate the value of whole companies; the IPEV Guidelines adopt that presumption explicitly."]},{"heading":"How LPs and lenders read comps","paragraphs":["LPs reviewing a GP's marks ask whether the peer set changed, whether the move in value came from earnings or from the multiple, and whether the subject's discount or premium to peers is consistent with the one at entry. A mark that rises mainly because peers' multiples rose is [multiple expansion](/glossary/multiple-expansion), not operating progress. Lenders use comps to estimate enterprise value coverage of their loans."]}],"classification_rules":[],"calculation_rules":[],"common_mistakes":["Applying a next-twelve-months (NTM) multiple to LTM earnings, or the reverse.","Applying the subject's adjusted EBITDA to peers' multiples based on reported EBITDA.","Choosing peers after seeing the answer, or changing the peer set each quarter.","Using the mean of a set with one extreme outlier without saying so.","Applying EV multiples to equity measures or deducting debt twice.","Taking the median without adjusting for clear differences in size, growth or risk."],"edge_cases":["When no listed peers exist, valuers lean on transactions, DCF or industry benchmarks and say why.","For loss-making companies, earnings multiples are meaningless; revenue multiples or scenario methods apply.","Conglomerates may need a separate peer set for each division ([sum of the parts](/glossary/sum-of-the-parts)).","In dislocated markets peer prices can move far within a quarter; the valuer still uses prices at the measurement date."],"external_standard_mappings":[],"source_ids":["SRC-IPEV-2025","SRC-US-FASB-ASU-2011-04"],"citations":[{"source_id":"SRC-IPEV-2025","pinpoint":"Section I 3.3, 3.4 (appropriate multiple incl. consistent accounting basis; earnings and revenue multiples; acquisition vs trading multiples; points of difference; lack of liquidity; comparable recent transactions; maintainable earnings), 3.5, 2.6","supports":"Peer selection criteria, choice of multiple, adjustments, transaction-multiple limitations, calibration and the presumption that market multiples indicate whole-company value","source":{"source_id":"SRC-IPEV-2025","title":"International Private Equity and Venture Capital Valuation Guidelines (2025 edition)","authors":"IPEV Board","publisher":"IPEV","document_type":"standard","url":"https://www.privateequityvaluation.com/Portals/0/Documents/Guidelines/2025%20IPEV%20Valuation%20Guidelines.pdf","year":2025,"publication_date":"Published 11 December 2025; in effect for quarterly reporting periods beginning on or after 1 April 2026; early adoption encouraged","jurisdiction":"intl","status":"Current; supersedes the December 2022 edition","last_verified":"2026-10-01"}},{"source_id":"SRC-US-FASB-ASU-2011-04","pinpoint":"ASC 820-10-35-24A","supports":"Market approach as one of three valuation approaches","source":{"source_id":"SRC-US-FASB-ASU-2011-04","title":"ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs","publisher":"Financial Accounting Standards Board","document_type":"standard","url":"https://storage.fasb.org/ASU2011-04.pdf","publication_date":"May 2011","jurisdiction":"US","status":"in force (codified in ASC 820)","last_verified":"2026-10-01"}}],"faq":[{"q":"Should I use the median or the mean of the comparable multiples?","a":"The median is less affected by outliers and is a common default, but neither is a rule. The selected multiple should reflect where the subject sits relative to the peers on growth, risk and size, with the reasoning documented."},{"q":"What is the difference between trading comps and precedent transactions?","a":"Trading comps use current share prices of listed peers; precedent transactions use prices paid to acquire whole companies, which include control and are often older and less transparent."}],"seo":{},"first_published":null,"last_reviewed":"2026-10-01","last_modified":"2026-10-01","content_version":"2.0.0","url":"https://altss.com/glossary/comparable-company-analysis","json_url":"https://altss.com/reference/concepts/comparable-company-analysis.json","title":"Comparable Company Analysis (Trading Comps)","formulas":[{"formula_id":"F-VAL-011-multiple-based-value","concept_id":"ALTSS-VAL-011","label":"Multiple-based value","plain":"M_i = EV_i / X_i for each peer; EV_s = selected multiple × X_s; equity E_s = EV_s − debt + cash","latex":"M_i = \\frac{\\mathrm{EV}_i}{X_i},\\qquad \\mathrm{EV}_s = \\hat{M}\\,X_s,\\qquad E_s = \\mathrm{EV}_s - D_s + C_s","variables":[{"symbol":"M_i","meaning":"multiple of peer i"},{"symbol":"EV_i","meaning":"enterprise value of peer i at the measurement date"},{"symbol":"X_i, X_s","meaning":"the metric for peer i and the subject: EBITDA, EBIT, revenue or an industry measure, for the same period and on the same accounting basis"},{"symbol":"\\hat{M}","meaning":"the multiple selected for the subject after adjusting for differences"},{"symbol":"D_s, C_s","meaning":"the subject's debt and other senior claims, and its cash"}],"convention_note":"Peers' multiples can be historical (LTM), current or forward (NTM); the subject's metric must be for the same period. The selected multiple may be the median, a quartile, or a point chosen by judgement; there is no single convention. Equity multiples (P/E) are applied to equity measures and need peers with similar financing and tax."}],"sources":[{"source_id":"SRC-IPEV-2025","title":"International Private Equity and Venture Capital Valuation Guidelines (2025 edition)","authors":"IPEV Board","publisher":"IPEV","document_type":"standard","url":"https://www.privateequityvaluation.com/Portals/0/Documents/Guidelines/2025%20IPEV%20Valuation%20Guidelines.pdf","year":2025,"publication_date":"Published 11 December 2025; in effect for quarterly reporting periods beginning on or after 1 April 2026; early adoption encouraged","jurisdiction":"intl","status":"Current; supersedes the December 2022 edition","last_verified":"2026-10-01"},{"source_id":"SRC-US-FASB-ASU-2011-04","title":"ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs","publisher":"Financial Accounting Standards Board","document_type":"standard","url":"https://storage.fasb.org/ASU2011-04.pdf","publication_date":"May 2011","jurisdiction":"US","status":"in force (codified in ASC 820)","last_verified":"2026-10-01"}]}