Comparable company analysis (trading comps) values a company from the prices investors pay today for similar public companies.
Five to ten companies with similar business mix, size, growth, margins, geography and risk. Sources: the target's own filings (competitors are named in the annual report), equity research and industry classifications.
Share price, diluted shares, debt, cash, preferred shares, non-controlling interests, and revenue, EBITDA, EBIT and EPS for the last twelve months (LTM) and the next twelve months (NTM) or next fiscal year from consensus estimates.
Assume in-the-money options are exercised and the proceeds buy back shares at the current price. Example: 10 million options with a $20 strike and a $25 share price. Proceeds are $200 million, which buys 8 million shares. Net new shares: 2 million. Options with a strike above the share price are ignored. Add restricted share units in full and convertibles if they are in the money.
LTM = last full fiscal year + current year-to-date minus prior year-to-date.
If peers have different fiscal year ends, blend their fiscal years to a common calendar year.
Match the numerator to the denominator.
| Multiple | Numerator | Denominator belongs to | Typical use |
|---|---|---|---|
| EV / Revenue | Enterprise value | All investors | Unprofitable or early-stage firms |
| EV / EBITDA | Enterprise value | All investors | Most industries |
| EV / EBIT | Enterprise value | All investors | When capital intensity differs |
| P / E | Share price | Shareholders | Mature, profitable firms |
| P / Book | Share price | Shareholders | Banks and insurers |
| P / FFO or P / AFFO | Share price | Shareholders | REITs |
Never pair enterprise value with net income or share price with EBITDA.
Show the minimum, 25th percentile, median, 75th percentile and maximum of each multiple. Decide where the target should sit relative to the median given its growth, margins and risk, then apply the range to the target's metric.
Peers trade at a median 9.0x EV/EBITDA, with a range of 8.0x to 10.0x. Maple's EBITDA is 180.
Comps reflect real market prices and are quick. But no two companies are identical, the whole sector may be mispriced, and accounting differences (IFRS versus US GAAP leases, for example) distort multiples.
A peer trades at $40 with 50 million diluted shares, debt of 600, cash of 100 and non-controlling interests of 50. Its EBITDA is 300 and its EPS $2.50.
| Item | Calculation | Result |
|---|---|---|
| Equity value | $40 x 50 million | 2,000 |
| Enterprise value | 2,000 + 600 + 50 minus 100 | 2,550 |
| EV / EBITDA | 2,550 / 300 | 8.5x |
| P / E | $40 / $2.50 | 16.0x |
Non-controlling interests are added because the peer's EBITDA includes 100% of subsidiaries it does not wholly own.
A peer's fiscal year ends June 30. Its EBITDA was 200 for the year ended June 2026 and is forecast at 240 for the year ended June 2027. Calendar 2026 EBITDA is half of each: 0.5 x 200 + 0.5 x 240 = 220. Without this step, comparing it with December year-end peers would mix different periods.
An IFRS company's EBITDA excludes most lease costs, which appear as depreciation and interest. Its EV should therefore include lease liabilities. A US GAAP company's operating lease cost sits in EBITDA, so its lease liability should usually be left out of EV. Mixing the two treatments overstates or understates multiples by several turns for retailers and airlines.
One peer at 40x because its earnings collapsed can drag the mean far from the typical multiple. Report the median and quartiles, exclude meaningless figures (negative or near-zero denominators) and say why each exclusion was made.
Multiples differ mostly because growth, margins, returns on capital and risk differ. Plotting EV/EBITDA against expected growth across peers, and fitting a line, shows where the target should sit given its own growth. A target with above-median growth deserves a multiple above the median, not the median itself.
NTM multiples look through recent disruptions and reflect what investors are paying for; LTM multiples rest on actual results. Use both and explain which you rely on.
Build a comps table for five real companies in one industry: equity value, enterprise value, LTM and NTM EV/EBITDA and P/E, with summary statistics. Apply the range to one of them and compare with its actual price.
Workbook for this module: Trading comparables, Starter (.xlsx) · Solution (.xlsx). Build the yellow cells in the starter; open the solution only to check your work.
Educational content only; not investment, tax or legal advice. Companies, tickers and figures are illustrative examples, not recommendations. Rules, rates and limits change, so check current details with the regulator, exchange or tax authority before relying on them. Worked examples are not forecasts. Written by Elizabeta Dimoska. RiskStock is not a registered dealer or adviser.