Valuation Methods – Public Comparables

There are numerous ways to value a company. Each method has its pros and cons and are usually used in combination to triangulate a value. Of course, the value is ultimately set by the buyer.

This post will give an example of public comparables methodology. A public compset is a select set of publicly traded companies where price metrics and operating metrics are laid out in a table for comparison with the target company. The example below is a quick compset I threw together of internet companies with Apple and RIMM thrown in for comparison.

What companies to include

Ideally, there are direct competitors and pure plays, meaning they only focus on that one product/service. You can also include companies that offer similar services. In our example compset below, most are internet/tech companies. But there is a sub-segment of pure internet companies if you remove Apple and RIMM.
You can also segment the list based on size or other outliers.
In my experience, the ideal list size is 7-10 companies.
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