Comparable company analysis: how to build and read a comps table

Comparable company analysis, or "comps," values a company by looking at what the market pays for similar businesses. You gather a set of peers, compute the same valuation multiples for each one, and see where your company sits in the range. It is the most common valuation method on Wall Street because it is fast and grounded in real prices, and it is the method most easily done badly.

A comps table looks objective: rows of companies, columns of ratios, a median at the bottom. But every cell rests on choices. Which companies count as peers? Which fiscal year? Which definition of cash? This guide walks through those choices on a real table of Apple, Microsoft and Alphabet priced at the close of March 31, 2026, shows how to read the result, and explains the related method of precedent transactions.

How comps work

The logic is simple. If similar businesses trade at 25 times earnings, a company with similar prospects should trade somewhere near 25 times its earnings too. A higher multiple needs a reason (faster growth, better margins, lower risk), and so does a lower one.

Match numerator and denominator. Price and market cap belong to shareholders only, so they pair with figures after interest, such as net income, EPS or book equity. Enterprise value belongs to both shareholders and lenders, so it pairs with figures before interest, such as revenue, EBIT or EBITDA. Mixing them, for example EV divided by net income, compares claims of different owners.

Step 1: choose the peers

A good peer has similar economics, not just a similar industry code. Ask whether the companies share:

• Business model: how they make money (hardware, subscriptions, advertising, licensing).
• Growth: a company growing revenue 20% a year should not be priced off one growing 3%.
• Margins and returns: high-margin businesses earn higher multiples on sales.
• Risk: leverage, customer concentration, regulatory exposure, cyclicality.
• Size and liquidity: a $5 billion company and a $3 trillion company face different costs of capital and investor bases.

Apple shows how hard this is. Its sales are 74% hardware and 26% services. No other company has that mix at that scale. Microsoft and Alphabet are used in this example because they are the closest in size, profitability and investor base, not because they sell the same things: Microsoft is mostly software and cloud, and Alphabet mostly advertising and cloud. A hardware peer group would compare Apple with companies whose margins are far lower. Both choices are defensible, and they produce different answers. Five to ten peers is common; three is enough to teach the mechanics but thin for a real analysis.

Step 2: align the periods

Multiples are only comparable if they measure the same stretch of time. The three companies in this example have different fiscal years:

Using each company's latest 10-K means Microsoft's earnings are six months staler than Alphabet's. For a company whose profits are growing, a stale denominator inflates the multiple. The standard fix is trailing twelve months (TTM): add the last four reported quarters, or take the latest fiscal year, add the year-to-date period since, and subtract the same period a year earlier.

The table in this guide deliberately uses each company's latest fiscal year so that every number traces directly to one 10-K. Keep in mind that this makes the comparison less like-for-like than a TTM table would be.

Step 3: build the table

Here is the table, built from each company's latest 10-K and closing prices on March 31, 2026 (Apple $253.79, Microsoft $370.17, Alphabet $287.56). Market cap is price times diluted weighted-average shares. EV adds total debt and subtracts cash and short-term investments.

One definitional choice to flag: Apple's EV here subtracts only cash and current marketable securities ($54,697 million), because Microsoft and Alphabet report a "cash and short-term investments" figure on that basis. Apple also holds $77,723 million of non-current marketable securities. Including them, as the Enterprise value (EV): formula, what counts as debt and cash page does at the fiscal-year-end price, would lower Apple's EV by about 2% and its EV multiples a little. Inside one table, use one definition for every row.

Step 4: read it

Start with the outliers, because they usually reveal an accounting effect rather than a pricing one.

Price to book. Apple's P/B of 51.6 against roughly 8 for both peers looks extreme. It is mostly a balance-sheet artifact. Apple has returned more cash through buybacks and dividends than it retained, leaving book equity of only $73.7 billion on a company worth about $3.8 trillion. Microsoft and Alphabet have much larger equity balances relative to their size. The same artifact drives Apple's ROE of 151.9% in the table. Neither tells you much about how the market prices Apple's business; P/B is the wrong multiple for this group. See Price-to-book ratio (P/B): book value, buybacks and ROE for when it is the right one.

P/E and EV/EBIT. On earnings, Apple at 34.0 times sits above Microsoft (27.1) and Alphabet (26.6). EV/EBIT, which strips out differences in cash, debt and tax, tells a similar story with different spacing: Apple 29.0, Alphabet 26.7, Microsoft 21.1. Microsoft's lower EV/EBIT sits alongside a much higher operating margin of 45.6%, against 32.0% for both Apple and Alphabet. Its figures are also the oldest of the three, so a TTM table, with more recent and for a growing company larger earnings, would move its row too.

Sales multiples and FCF yield. On sales, the three are close: P/S of 9.2, 9.8 and 8.7. A sales multiple only makes sense next to margins, and Microsoft converts far more of each sales dollar into operating profit. Apple and Microsoft both show a 2.59% free-cash-flow yield; Alphabet's 2.08% is lower partly because of heavy capital spending ($91.4 billion in its fiscal 2025).

In practice analysts show the median (less distorted by one outlier than the mean), the interquartile range for larger sets, and the company's own position as a percentile of the group. They also show the company's own multiple history: a stock trading at 34 times earnings against a 10-year average of 25 is a different story from one that has always traded at 34.

Precedent transactions

Precedent transaction analysis builds the same kind of table from completed takeovers of similar companies, using the price the buyer paid. Deal values come from merger announcements and filings such as merger proxy statements and Form 8-K.

Precedent multiples are usually higher than trading multiples because an acquirer pays a control premium to buy the whole company and its cash flows. They are the main reference in fairness opinions and takeover negotiations. Their weaknesses: deals are infrequent, old deals reflect old market conditions and interest rates, and each one carries specific synergies that may not apply elsewhere. For a company as large as Apple, no meaningful precedent set exists.

Pitfalls

• Industry label as peer group. Same sector does not mean same economics.
• Mismatched periods. Mixing fiscal years that end months apart, or one company's TTM with another's last annual figure.
• Mixed definitions. Adjusted EPS for one peer and GAAP for another, or different cash definitions in EV.
• Negative or tiny denominators. P/E is meaningless for a loss-maker; P/B is distorted by buybacks; EV/EBITDA can flatter capital-heavy firms.
• Circularity. If the whole group is richly priced, the comps say your company is "in line" at a rich price. Pair comps with an intrinsic method such as a Discounted cash flow (DCF): a step-by-step valuation on Apple.

Comps compared with other methods

How Finabase does it

Finabase does not build a side-by-side valuation table for you. The Peers tab lists up to 12 companies in the same industry with their quote, market cap and year-to-date return. That is a starting list of candidates, not a set of fundamentals: you still have to decide which are true peers and pull their numbers. The Valuation tab shows each company's own multiples history over ten fiscal years (P/E, P/S, P/B, P/FCF, EV/EBITDA, EV/Sales, FCF yield) plus margins and returns, so you can open the tab for each peer in turn and compare. The Financials tab has each company's revenue, operating income, debt and cash by quarter, which is what you need to build TTM figures and a consistent EV.

Frequently asked questions

What is comparable company analysis?

It is a relative valuation method that compares a company's valuation multiples, such as P/E and EV/EBIT, with those of similar listed companies. It shows how the market prices the company against its peers rather than estimating value from its own cash flows.

How many comparable companies should I use?

Most analysts use five to ten close peers; fewer than five makes the median fragile, and more than fifteen usually means some are not truly comparable. Quality of fit matters more than the count.

Why use TTM figures in a comps table?

TTM figures put every company on the same twelve-month window even when their fiscal years end in different months. Without them, a company whose last fiscal year ended nine months ago is compared on older, often lower, earnings.

Which multiple is best for comps?

There is no single best one: use enterprise multiples such as EV/EBIT or EV/EBITDA when companies have different debt and cash, P/E when capital structures are similar, and sales multiples only for companies with comparable margins or no profits yet.

What is the difference between trading comps and precedent transactions?

Trading comps use current market prices of similar listed companies; precedent transactions use prices paid in past acquisitions. Precedent multiples usually run higher because they include a premium for control.

Summary

Comparable company analysis values a company against the multiples of similar businesses. It works only as well as its peer set and its period alignment: on March 31, 2026, Apple's, Microsoft's and Alphabet's latest fiscal years ended six, nine and three months earlier, which TTM figures would correct. Reading the resulting table means explaining outliers first, as with Apple's buyback-driven P/B of 51.6, then comparing the cleaner multiples, such as EV/EBIT of 29.0 against 21.1 and 26.7, alongside margins and growth. Use the median and the range as context, pair comps with an intrinsic method, and treat precedent transactions as a separate, control-premium view of value.