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Module 4 · Comparable Company Analysis Core

“What are similar companies worth?” is the fastest sanity check in valuation. Done properly, comps analysis turns a peer group into a defensible price range. Done lazily, it just launders your biases.

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By the end of this module you'll be able to

  • Build a defensible peer set and comps table.
  • Turn a peer-median multiple into an implied price per share.
  • Decide when a company deserves a premium or a discount.
  • Read a football-field chart — the signature output of triangulation.

Choosing comparables

The whole method rests on the peer set. Good comparables share the things that drive a multiple: sector and business model, size, growth profile, and margin profile. A regional grocer belongs with other grocers, not with a software firm that happens to have similar revenue. The closer the match on the drivers, the more meaningful the comparison.

Canadian wrinkleMany TSX industries are oligopolies — a handful of banks, two railways, three telecoms, a few grocers. Peer sets are thin, so you'll often reach for US comparables. That's fine, but handle currency translation and market differences (growth, rates, liquidity) carefully, or you'll import a distortion.

Building the comps table

Lay peers out as rows and metrics as columns. Include the multiples and the drivers that explain them, so you can see why one peer trades richer than another:

PeerEV/EBITDAP/ERev. growthEBITDA margin
Grocer A8.0×16×3%7%
Grocer B7.2×14×2%6%
Grocer C9.1×19×5%8%
Grocer D8.4×17×4%7%
Median8.2×16.5×3.5%7%

Use the median, not the average — one peer on a freak multiple can drag an average far from reality, while the median shrugs it off.

From peer median to implied price

Now apply the peer median to your target's own numbers. The EV/EBITDA route:

  1. Implied enterprise value = peer median EV/EBITDA × target EBITDA.
  2. Implied equity value = implied EV − net debt.
  3. Implied price = implied equity value ÷ diluted shares.
Worked exampleYour target grocer has EBITDA of $2B, net debt of $4B and 200M shares. At the peer median 8.2× (we'll round to 10× for round numbers in the quiz), implied EV = 8.2 × 2 = $16.4B. Less $4B net debt = $12.4B equity. Over 200M shares = $62 per share. Run the same target through the P/E route (16.5× × its EPS) and you get a second implied price. Two roads, two estimates — the start of a range.

Premiums and discounts

Your target is never exactly the median peer. Adjust deliberately. A company deserves to trade above peers when it has a wider moat, faster growth, higher margins, a stronger balance sheet, or better governance. It deserves a discount when those run the other way. The skill is naming the premium or discount explicitly — “I'm applying a 10% premium for its superior margins” — rather than fudging the peer set until you get the answer you wanted.

The football field

Once you have several estimates — comps by EV/EBITDA, comps by P/E, a DCF, a DDM — plot each as a horizontal bar on one chart. Where the bars overlap is your fair-value neighbourhood; where a method sits far from the pack, you have a question to answer. This football field is how banks present valuations, and it is the single most useful picture you can draw of your own.

A football-field valuation chart Horizontal bars for comps EV/EBITDA, comps P/E, DCF and DDM overlapping in a range around 60 to 95 dollars, with the current price marked at 70. Price $70 Comps EV/EBITDA Comps P/E DCF DDM $50$110
Each method is one bar. The cluster is your fair-value range; the dashed line is today's price. Here every method sits above the price — a coherent “undervalued” read.
💡 Screening for peers by sector? Our Quorum value finder ranks names across the market, and the Comparison tool lines any two up head to head.
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Educational purposes only; not financial advice. Example figures are illustrative. Always do your own research and consult a licensed advisor.