Module II· Trading ComparablesBasic
Question

What are the pros and cons of trading comps versus a DCF?

Answer
  • + Market-based, easy to communicate, fewer assumptions, fast
  • No perfect comps, follows market trends (including hype), a static snapshot
  • + Fundamental, independent of market sentiment
  • Many assumptions, sensitive to WACC + growth

Both in parallel — triangulation. Both have weaknesses; together they give a more robust range.