What is the objective of a comparable company analysis?

The objective of a comparable company analysis is primarily to assess a company's value relative to its industry peers. This type of analysis involves selecting a set of similar companies, typically operating within the same industry, and evaluating various financial metrics such as earnings, revenue, or EBITDA. By comparing these metrics across the peer group, analysts can determine how the company in question is positioned in terms of valuation multiples. The goal is to identify a fair market value based on what similar companies are worth, thus providing a benchmark for investors and stakeholders when making decisions about the company in question. This method is widely used because it harnesses market data to offer insights into how a company is perceived by the market when compared directly to its competitors.