Fundamental Analysis

Relative Valuation — Multiples & Comps

Value a company the way analysts actually do all day — against its peers. Build a comp set on a live Comps Terminal, standardize the price into a multiple, read the median and where the target sits, and separate a genuine bargain from a value trap.

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StartLesson 1 · Why Multiples Exist — Relative vs Intrinsic

What you’ll leave with10 lessons · 10-line playbook

A multiple standardizes price so I can rank a company against its peers — but below the median is a question, not a buy.
Trailing P/E looks back, forward P/E looks ahead; PEG growth-adjusts it, a loss reads 'n.m.', and peer-median P/E × my EPS gives an implied price.
EV = market cap + net debt − cash; pair it with EBITDA or sales (never EPS), and it exposes the leverage mirage a low P/E can hide.
P/B prices a company against its book (strip goodwill for P/TBV); read it beside ROE — a high return justifies a premium, and a cheap P/B on a low ROE is a discount deserved, not a bargain.
P/FCF prices cash, not accruals; a yield is that multiple flipped (cash ÷ price), so higher is cheaper — but a fat dividend yield the cash can't cover is a trap, not a bargain.
A comp is only a peer if the business matches — model, growth, margin, size, cyclicality; a shared sector label isn't enough. The peer median moves with membership, so fix the set on the business BEFORE you read the target's discount, or you're just cherry-picking.
A reported multiple is only as clean as its denominator: strip one-off gains, expense stock comp, and count diluted shares before you compare. One adjustment can flip the cheapest name to the dearest — and you must normalize the whole SET, not just your target.
Precedent deals are a comp set of buyers: deal multiples run richer than trading ones by the control premium (offer ÷ pre-deal − 1), which bakes in synergies and a competitive auction. Takeout value = median recent deal multiple × your metric — but discount stale, cycle-peak deals; they were struck in a different market.
A multiple is a compressed forecast of growth, returns and risk — so a high one can be worth it and a low one can be a trap (cheap because the business is deteriorating). Read it against the row, then triangulate P/E comps, EV/EBITDA comps, precedents and your DCF on a football field: overlap is a defensible value; a sharp comps-vs-DCF disagreement is the cue to do more work.
Relative valuation is one loop: standardize price into a multiple, build a set of true peers, normalize everyone the same way, and read your target against the median — then judge WHY. A discount is a question, not an answer; the multiple gives you a number, judgment separates a bargain from a trap, and when comps and the DCF disagree, that gap is the signal to do more work.

Relative Valuation — Multiples & Comps

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