Comps Analysis:= comparing companies with multiples.
More growth potential = Better.
But make sure that the companies being compared are similar in size/industry/geographic regions.
Multiples Analysis
using the ratios of accounting line items (like EBITDA, income, etc.) to evaluate the potential growth of a firm.
- Ratios are calculated from estimations of future balance sheet line items.
- We use rate of return to compare investments, not price. . You can’t compare price.
The following are commonly used multiples: