How are peer companies selected for comps?

Peers are selected from the same GICS sector and industry, with similar business models, revenue scale, and growth profiles. This tool uses Yahoo Finance sector classification and recommended similar companies to surface peers automatically. True comparability requires similar margins, capital intensity, and competitive positioning — a fast-growing SaaS company and a legacy software firm are in the same sector but are poor comps for each other.

What valuation multiples does this tool use?

The tool shows P/E (price-to-earnings), EV/EBITDA (enterprise value to EBITDA), P/S (price-to-sales), and P/B (price-to-book), plus revenue growth and net margin for context. P/E is most common but only works for profitable companies. EV/EBITDA is preferred when comparing companies with different debt levels. P/S is used for high-growth or unprofitable companies. P/B is standard for banks and asset-heavy sectors.

How do I interpret the implied fair value range?

The implied fair value range shows what your target stock would be worth if it traded at the peer group median for each multiple. A stock trading at a discount to peers on multiple metrics may be undervalued — or may be cheap for a reason (slower growth, weaker margins). Always compare growth and profitability alongside valuation. A stock cheap on P/E but growing slower than peers is not the same opportunity as one that is cheap on P/E while growing faster.

When should I use comps vs DCF valuation?

Use comps to quickly benchmark a stock against what the market pays for similar businesses — it is fast, market-grounded, and useful for identifying relative cheapness or richness. Use DCF analysis when you want to value the business on its own merits: projected cash flows, growth rate assumptions, and a discount rate. Professional analysts triangulate across both methods. Start with comps to see where the stock sits in the peer group, then run a DCF to check whether the absolute valuation holds up.

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Comparable Company Analysis

Compare any stock against sector peers on P/E, EV/EBITDA, P/S, margins, and growth. Auto-populates from Yahoo Finance. Free, no signup required.

By Basis Report Editorial DeskReviewed by Basis Report Methodology TeamMethodology

How Comparable Company Analysis Works

What comps analysis tells you

Comparable company analysis (comps) is the first valuation method taught in investment banking. It answers a simple question: is this stock cheap or expensive relative to peers? A stock trading at 15× P/E looks expensive in isolation — but if the sector median is 25×, it may actually be undervalued.

Use comps as a relative sanity check alongside absolute methods like DCF analysis.

Which multiple to use

P/E is the most widely used — but only works for profitable companies. EV/EBITDA is better when comparing companies with different debt levels. P/S is useful for high-growth companies with thin or negative margins. P/B is favored for banks and asset-heavy businesses.

For a deep dive on EV/EBITDA, use the EV/EBITDA calculator.

When cheap is a trap

A stock trading at a discount to sector peers can be a value trap — cheap because the market sees something you don't: declining revenue, margin compression, or cyclical risk. Always check growth and margin metrics alongside valuation. A stock that is cheap and growing faster than peers with better margins is the real opportunity.

Comps in context

Professional analysts triangulate across three methods: comps (relative valuation), DCF (intrinsic value), and precedent transactions (M&A context). Start here to see where the stock sits in the peer group, then run a DCF to check whether the absolute valuation holds up. Read the full guide: valuation fundamentals.

Frequently asked questions

What is comparable company analysis?

Comps evaluates a company's valuation multiples — P/E, EV/EBITDA, P/S, P/B — against publicly traded peers in the same sector. It answers: is this stock cheap or expensive relative to competition? It's the most widely used relative valuation method in investment banking and equity research.

What multiples are used in comps?

P/E (price-to-earnings) is most common. EV/EBITDA is preferred when comparing companies with different capital structures. P/S (price-to-sales) is used for high-growth or unprofitable companies. P/B (price-to-book) is standard for banks and asset-heavy sectors.

How are peer companies selected?

Peers are selected from the same GICS sector and industry, with similar business models and scale. This tool uses Yahoo Finance recommendations and sector classification to surface peers automatically. You can override the ticker to compare any two stocks.

Is a lower P/E always better?

Not necessarily. A low P/E can mean the market expects declining earnings, not that the stock is cheap. Always check revenue growth and net margin alongside valuation multiples. Cheap on P/E but shrinking revenue is a value trap; cheap on P/E with expanding margins is a potential opportunity.

More tools & guides

DCF Calculator

Find intrinsic value with discounted cash flow analysis

P/E Calculator

Calculate fair value with trailing and forward P/E

EV/EBITDA Calculator

Enterprise value multiples with sector benchmarks

SOTP Calculator

Value conglomerate segments separately against peer multiples

Valuation Guide

DCF, multiples, and how to triangulate fair value

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