Comparable Company Analysis or Comps

Comps is the process of using comparable company analysis, which is the relative valuation technique to determine the amount by which a company should be valued compared to others similar in business, industry, or sector. In this method, a peer group is identified and financial data obtained, followed by the computation of valuation multiples-which might include EV/EBITDA or P/E-then those multiples are applied on the target\'s metrics. Although Comps is a fast, market-driven method, it is not without its limitations. There is a dependency on comparable companies that can be inefficient because of market imperfections. In addition, it requires enterprise value and equity value multiples to be separated. Hence, with its drawbacks notwithstanding, Comps is widely applied within investment banking and corporate finance.