Comparable Company Analysis

Comparable Company Analysis, usually shortened to comps, is the most widely used way to put a market value on a business. The idea is simple. If you want to know what your company is worth, look at what the market already pays for companies that look like yours, then apply the same yardstick to your numbers.

It answers the question every founder, CFO, and investor eventually asks: what should we actually trade at? Instead of guessing, comps anchor that answer to real, observable prices in the public market.

How it works, step by step

1. Build the comp set. Pick 5 to 15 public companies that genuinely resemble yours in industry, business model, size, and growth. This step makes or breaks the analysis (see “What is a fair comp set?” below).
2. Pull the multiples. For each comparable, calculate valuation multiples such as EV/Revenue, EV/EBITDA, and P/E. These express how many dollars of enterprise value or market cap the market assigns per dollar of revenue, EBITDA, or earnings.
3. Find the central tendency. Take the median of each multiple across the set. The median is more reliable than the average, which a single outlier can distort.
4. Apply it to your metrics. Multiply the median multiple by your own revenue, EBITDA, or earnings to get an implied valuation. Showing a range across the multiples gives you a defensible valuation band rather than one number with false precision.

A quick example

Suppose comparable software companies trade at a median of 4.0x EV/Revenue, and your company does $20M in revenue. The implied enterprise value is roughly $80M. If those same companies trade at a median 14x EV/EBITDA and you generate $6M of EBITDA, that line of reasoning implies about $84M. When two independent multiples land close together, you have a credible valuation story.

Why investors trust it

Comps are grounded in real, current market prices rather than long-range forecasts. That makes them harder to argue with than a discounted cash flow model, whose output swings widely with small changes in assumptions. When you walk into a fundraise, a sale process, or an earnings call, a clean comp set is the language sophisticated money already speaks.

Where it goes wrong

• A lazy comp set. Throwing in companies that are bigger, faster growing, or more profitable than you inflates the result, and any serious investor will strip them out immediately.
• Ignoring growth and margin differences. A company growing 40% a year deserves a higher multiple than one growing 5%. Comps work best when the set is genuinely like for like, or when you adjust for the difference.
• Stale data. Multiples move with the market. A comp set built six months ago can be meaningfully off today.

Done well, comps are not a spreadsheet exercise. They are the foundation of the valuation narrative you tell investors. The numbers establish the range, and the comp set establishes your credibility.