1.2·5 min read
When Comps Shine (and Fail)
Comps are quick and grounded in real prices, but they inherit the market's mood and need a clean peer set.
By the end you can
- ✓List the strengths and limits of comps
- ✓Know when to lean on them vs a DCF
- Strength: grounded in real, current market prices - hard to argue with the tape.
- Strength: fast and intuitive; great for a sanity check on a DCF.
- Limit: needs a genuinely comparable peer set, which thin or unique industries lack.
- Limit: inherits the market's mood - if the whole sector is overpriced, comps say your company is too.
Use both
The pro move is to run comps and a DCF and triangulate. When they disagree sharply, that gap is the most interesting thing in the analysis - and worth understanding before you trust either number.
Check yourself
A key limitation of comparable company analysis is that it: