Comparable Companies
Benchmarking Against Public Peers & Recent Private Transactions
Chapter 7's Comparable Company Analysis benchmarks the subject business against its publicly traded peers and recent private transaction comparables across the full set of financial, operational, and valuation metrics that determine where the subject sits within its industry — and therefore which multiple, margin assumption, and growth rate it deserves.
The Role of Comparable Company Analysis
Comparable Company Analysis — known as "trading comps" or "public comps" — is the bedrock of the market approach to valuation. It establishes what the market is currently paying for similar businesses on a minority, marketable basis: the trading multiples of publicly listed companies in the same industry, which reflect real-time investor pricing of the growth, risk, and profitability characteristics of comparable enterprises.
But the comparable company analysis in Equitest's Chapter 7 goes beyond pulling multiples. It benchmarks the subject company across the full spectrum of financial and operational metrics — revenue growth rate, EBITDA margin, gross margin, leverage, return on equity, asset turnover, revenue per employee — to determine precisely where the subject sits relative to its peers. This positioning determines whether the subject deserves a multiple at the 25th percentile, the median, or the 75th percentile of the comparable set.
Chapter 7 is the analytical bridge between the qualitative strategic assessment (Chapters 4–6) and the quantitative valuation multiples (Chapters 13–19). The SWOT and Porter's Five Forces explain why the subject is positioned as it is; the comparable company data shows how the market prices that positioning numerically.
What Is Benchmarked in Chapter 7
Every metric feeds a specific downstream valuation input — from multiple selection to discount rate to margin assumptions.
How Equitest Implements Comparable Company Analysis
Equitest's Chapter 7 module delivers a complete, market-sourced comparable company benchmarking analysis — with peer selection, metric calculation, percentile positioning, and direct linkage to every downstream multiple selection and margin assumption in the valuation.
Industry & Size-Filtered Public Peer Set
Equitest identifies the comparable public company peer set by filtering the Damodaran industry database and proprietary company data by SIC/NAICS industry code, revenue size band, and business model similarity. The resulting peer set is presented in the report with each company's name, ticker, key financials, and computed multiples — fully transparent and auditable.
Percentile Distribution Across All Metrics
For each metric — multiples and operational KPIs — Equitest computes the full distribution across the peer set: minimum, 25th percentile, median, 75th percentile, maximum. The subject company is plotted against this distribution, making its relative positioning explicit and documented — the precise evidence base needed to justify a premium or discount to the median multiple.
Benchmarking → Multiple Justification
The subject company's percentile positioning across the comparable peer set directly informs the multiple selected in each of Chapters 13–19. A company that ranks in the 70th percentile on EBITDA margin and the 65th percentile on revenue growth warrants a multiple above the median — and Chapter 7's data makes this selection specific and defensible rather than impressionistic.
The Quantitative Anchor for Qualitative Assessments
Chapter 7 provides the numerical grounding for conclusions reached qualitatively in Chapters 4 and 6. The SWOT may identify customer concentration as a weakness; Chapter 7 shows how this compares numerically to peers. Porter's analysis may flag high rivalry; Chapter 7 confirms this in the compressed margin distribution of the peer set. The three chapters together form a complete, internally consistent strategic and market picture.
Public Comps vs. Transaction Comps — Both in Equitest
Chapter 7 covers public company benchmarking (trading comps). Chapter 19 adds precedent M&A transactions (deal comps). Together they form the complete market approach.
Minority, Marketable Basis
Publicly traded company multiples reflect the price a minority investor pays for a liquid, marketable share in a similar business. These multiples form the starting point for the market approach — applied to the subject company's financials, then adjusted for size, liquidity, and control premium differences between the subject and its public peers.
Control, Deal Basis
Closed M&A transaction multiples reflect what strategic and financial buyers actually paid for controlling interests in similar businesses — including the control premium. These deal multiples are the most relevant benchmark when the subject company is being valued for sale, acquisition, or a fairness opinion, as they reflect the price of 100% ownership in an arm's-length negotiated deal.
Equitest presents both: Chapter 7 trading comps establish the minority-basis market pricing for the subject company. Chapter 19 transaction comps add the control premium evidence that supports the enterprise value when the subject is being valued for sale or acquisition. The spread between the two is the implied control premium — typically 20–30% — and is explicitly disclosed and discussed in Equitest's valuation conclusion chapter.
The Comparable Company Benchmarking Process
Screen and Select the Peer Group
Identify publicly traded companies in the same SIC/NAICS industry code with a similar revenue size, business model, and geographic footprint. The peer group should be large enough to produce a statistically meaningful distribution (minimum 5–8 companies) but narrow enough that each peer is genuinely comparable to the subject business.
Compile and Normalize Financial Data
Pull the most recent LTM (last twelve months) financials for each peer: revenue, gross profit, EBITDA, EBIT, net income, total assets, total equity, and net debt. Normalize for any non-recurring items or accounting differences that would distort comparability. Compute enterprise value from market cap plus net debt.
Compute Multiples & Operational Metrics
Calculate all relevant valuation multiples (EV/EBITDA, EV/Revenue, EV/EBIT, P/E, P/BV) and operational metrics (revenue growth, EBITDA margin, gross margin, leverage, ROE, ROA) for each peer. Compute the distribution statistics — min, 25th percentile, median, 75th percentile, max — across the peer group for each metric.
Position the Subject Within the Peer Distribution
Plot the subject company's own financial metrics against the peer distribution. A subject company with an EBITDA margin at the 70th percentile of its peer group, growing faster than the median, with lower leverage, warrants a multiple above the median. The positioning documentation makes this selection specific, reproducible, and defensible.
Apply DLOM & Size Adjustments
Public company trading multiples are on a minority, marketable, large-cap basis. Private company valuations require adjustments for: lack of marketability (DLOM — typically 20–35%), size premium (smaller companies trade at lower multiples than large-cap peers), and in some cases, a control premium (when valuing a controlling interest). Equitest applies these adjustments in the valuation chapters with the basis for each discount or premium clearly disclosed.
