Comparable companies (comps)

Factual definition

A valuation method using multiples implied by publicly traded comparable companies. Precedent transaction comparables instead use prices paid in acquisitions; the two approaches have different valuation contexts.

Comparable companies (comps) in round numbers

Hypothetical: four public peers have enterprise values of 7–9 times comparable-period earnings before interest, taxes, depreciation and amortization (EBITDA). That enterprise-value / EBITDA range is a starting point for valuing a fifth company, subject to differences in size, growth, risk, accounting and business quality.

How Shayne Fitz-Coy uses Comparable companies (comps)

Listen to the earnings calls and take the transcripts. Then find which analysts cover the company.

Look at the two or three other companies that same analyst covers, and what the rest of that team covers. That is how you build the universe of comps.