In this article, two other aspects of comparable analysis will be discussed: how this relative valuation method fits into the bigger picture of comprehensive company valuation and investing strategies related to comparable analysis. Examples will focus on Singapore-listed companies to benefit domestic investors.
Comparable analysis is a relative valuation method that compares a company’s financials to those of a group of peers in similar businesses. The financials compared can be either historical or projected and can be customised based on the investor’s priorities and investment goals. It also does not just have to be against a group of peers; a company’s financials can be compared against its own historical averages to assess the extent to which it may be undervalued or overvalued.
The first part of this series in the previous issue focused on defining and understanding the basics of comparable analysis. To recap and reiterate, almost any financially quantifiable metric can be compared with the main goal of picking the best companies from a cohort of similar businesses.
