How do you select comparable companies for a comps analysis?

Answer

Screen on: (1) Industry/sub-sector — direct competitors operating the same business model; (2) Size — similar revenue, market cap, or EBITDA scale; (3) Geographic exposure — companies operating in similar markets; (4) Growth profile — similar revenue growth rates; (5) Profitability — similar margin profile; (6) Capital structure — similar leverage; (7) Liquidity — sufficient trading volume for multiples to be meaningful. A final list typically lands at 5-15 comps.