comparable company analysis
Comparable company analysis estimates a company’s value by comparing it to similar public businesses using financial ratios and market data.
Why comparable company analysis brings market context to valuation
Comparable company analysis (often called “comps”) estimates the value of a business by looking at how similar companies are valued in public markets. It’s a relative approach—built on the idea that businesses in the same sector, with similar profiles, should trade at comparable multiples.
This method is a go-to in investment banking, M&A, and financial modeling. It anchors a company’s valuation in reality, not just in projections. If your closest competitors are trading at 5x revenue or 12x EBITDA, those numbers become a reference point for what the market might pay for you.
But comps do more than benchmark value. They shape perception. Investors use them to sanity-check expectations. Acquirers use them to negotiate. Founders use them to set internal targets. I’ve seen teams justify massive valuations without comps—and struggle to convince investors. When comps are part of the story, the conversation feels grounded.
A practical example in setting valuation expectations
Let’s say you’re preparing a fundraising round. You run a SaaS business with $10 million in ARR and 20% growth. Public companies with similar profiles are trading at 6–8x revenue. That range gives you a valuation window: $60–80 million. It’s not definitive—but it sets the market expectation.
Now suppose your comps also show higher gross margins or lower churn. You can argue for the upper end of that range—or even a premium. In one case I advised, we discovered that a client’s direct peers had weaker retention. We used that insight to anchor the pitch at a higher multiple. It worked. The deal closed above market median.
Comps don’t tell you everything. But they make sure you’re not guessing in a vacuum.
What comparable company analysis is not
They’re not a substitute for intrinsic valuation. Comparable company analysis reflects market mood—sometimes irrational, short-term, or distorted. Another mistake? Picking the wrong peers. If your comp set includes giants or businesses with different models, the multiples will mislead.
Also, comps don’t reflect your strategic potential. They’re based on what exists today, not what you could become. Use them to set a floor—not a ceiling.
Use it to ground your narrative in data
Comparable company analysis brings context, discipline, and credibility. When used well, it turns valuation from a wish into a case.
« Back to Glossary Index