Module II· Trading ComparablesBasic
Question
What are trading comparables and what do you use them for?
Answer
Definition
Publicly listed companies with a similar business model, size, and risk profile — from their multiples (EV/EBITDA, EV/Sales, P/E) you derive a valuation range for the target.
Logic
The market prices comparable companies every day — those prices reflect consensus expectations on growth, margins, and risk.
Advantages
market-based, easy to communicate
Disadvantages: no perfect comps, no M&A control premium priced in
Standard role
One of the three core methods alongside DCF and precedents.