Valuation · 2026-07-13 · 9 min read

Written and reviewed by Project Financial Advisor · FCA · CGMA · ACMA — Chartered Accountant

Comparable Company Analysis: Valuing With Trading Comps

How to run a comparable company analysis — selecting the peer set, calculating EV/EBITDA and EV/Revenue, and applying the median multiple to value a business.

Comparable company analysis — 'trading comps' — values a business by looking at what similar public companies actually trade for. Alongside a DCF and precedent transactions, it is one of the three pillars of valuation, and in practice it is the sanity check every banker and investor runs first. Where a DCF asks 'what is this worth based on its cash flows?', comps ask 'what is the market paying for businesses like this right now?'

Step 1 — Select the peer set

This is where most comps go wrong. A peer is not just 'another company in the industry' — it should share the economics that drive value: similar business model, growth rate, margin profile, size and geography. A high-growth 80%-margin software firm is not comparable to a mature 20%-margin IT services business, even though both are 'tech'. Four to eight genuinely similar peers beat twenty loose ones, because the median of a tight set is meaningful while the median of a scattered set is noise.

Step 2 — Calculate the multiples

For each peer, compute enterprise value (market capitalisation plus net debt) and divide by the relevant metric. EV/EBITDA is the workhorse because EBITDA is capital-structure neutral and matches enterprise value. EV/Revenue is used when peers are loss-making. Always pair an enterprise-value numerator with a pre-interest denominator (EBITDA, EBIT, revenue) — pairing EV with net income is a classic error, because net income is after interest and therefore belongs with equity value.

Step 3 — Apply the multiple to your business

Take the median (not the mean — one outlier distorts an average) and apply it to your company's metric. If your business generates $50m of EBITDA and the peer median is 11.5x, implied enterprise value is $50m × 11.5 = $575m. Subtract net debt to reach equity value. Then ask the honest question: does your business deserve the median, or a discount or premium? A slower-growing, lower-margin company should be valued below the median, and you should say so explicitly rather than quietly using the average.

Present a range, not a point

The output of comps is a range, not a number. Using the peer spread above, $50m of EBITDA implies $500m at 10.0x and $750m at 15.0x. That range is the honest answer, and where your business sits inside it is an argument you make with growth, margin and risk — which is precisely why comps and a DCF belong side by side.

Why comps and a DCF disagree

Comps import today's market sentiment; a DCF reflects your specific forecast. When the market is exuberant, comps read high; when it is fearful, they read low — regardless of the underlying cash flows. A DCF that lands far below the comps range usually means either the market is pricing in growth you have not modelled, or the peers are overvalued. Both are worth investigating; neither means one method is 'wrong'.

Common mistakes

Four recur: choosing peers by industry label rather than economics; using the mean instead of the median; mixing enterprise-value multiples with equity-value denominators; and forgetting to adjust for one-off items so the EBITDA you multiply is a clean, run-rate figure. Each quietly moves the valuation by tens of percent.

Cross-check comps with a DCF

EasyFinancialModels computes enterprise value via DCF and an EV/EBITDA exit-multiple cross-check side by side, so you can triangulate your comps range against your own cash flows. Build a DCF valuation model free for up to 3 years and compare what your forecast says with what the market is paying.

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About the author

Every model is built and reviewed by the project's Financial Advisor — a Fellow Chartered Accountant (FCA), Chartered Global Management Accountant (CGMA) and Associate Chartered Management Accountant (ACMA) with around two decades of corporate finance, audit and accounting experience, designing investor-grade financial models across industries. Full credentials and background are available on LinkedIn. More about the author →

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