Multiples Comparison Sheet
Absolute valuation (DCF, dividend discount model) estimates intrinsic value from first principles. Relative valuation compares a company to peers using trading multiples—price-to-earnings (P/E), EV/EBITDA, price-to-book (P/B)—answering the question: Is this company cheaper or more expensive than similar companies? A multiples comparison sheet pulls comparable company data into a single worksheet, showing where your target company stands relative to the market. This helps you sanity-check absolute valuations, identify relative value opportunities, and understand what assumptions the market is pricing in.
Quick definition: Relative valuation values a company by comparing its trading multiples (price-based ratios) to those of comparable companies, adjusting for differences in growth, profitability, or risk.
Key takeaways
- P/E, EV/EBITDA, EV/Sales are the most common multiples; each isolates different drivers (profitability, capital structure, revenue scaling)
- Peer selection requires honest matching on industry, geography, business model, and scale; apples to apples
- Multiples distribution (mean, median, range) quantifies the market's pricing consensus; outliers deserve explanation
- Adjusting multiples for growth, profitability, or risk differences explains why your company might command a premium or trade at a discount
- Implied valuation applies the peer median multiple to your target company's financials, producing a relative value estimate
- Triangulation between absolute (DCF) and relative valuations reveals consistency and flags mispricing
Building a multiples comparison template
Create a worksheet with comparable companies listed in rows, key metrics in columns:
Comparable Companies Analysis
Company Market Cap Revenue EBITDA Net Income Shares
($M) ($M) ($M) ($M) (M)
Competitor A 1,200 400 120 60 50
Competitor B 900 350 90 45 40
Competitor C 1,500 500 140 70 60
Target Company (you) 1,100 420 105 52 55
Average of Comps 1,200 416.7 116.7 58.3 50
Median of Comps 1,200 400 120 60 50
From these base numbers, calculate multiples:
Multiples Comparison
Company P/E Ratio EV/EBITDA EV/Sales Price/Book PEG Ratio
Competitor A 20.0x 10.0x 3.0x 2.5x 2.5
Competitor B 20.0x 10.0x 2.6x 2.2x 2.3
Competitor C 21.4x 10.7x 3.0x 2.8x 2.6
Target Company 21.2x 10.5x 2.6x 2.4x 2.4
Comp Average 20.5x 10.2x 2.9x 2.5x 2.5
Comp Median 20.0x 10.0x 3.0x 2.5x 2.5
Target Premium +3.4% +3.0% -11.2% -4.0% -4.0%
Calculate each multiple from financials:
-
P/E Ratio = Stock Price ÷ Earnings Per Share (or Market Cap ÷ Net Income)
- Example: Competitor A, Market Cap $1,200M, Net Income $60M → P/E = 1,200 ÷ 60 = 20.0x
-
EV/EBITDA = Enterprise Value ÷ EBITDA
- Example: Market Cap $1,200M − Net Debt $100M = EV $1,100M; EV $1,100M ÷ EBITDA $120M = 9.2x
-
EV/Sales = Enterprise Value ÷ Revenue
- Example: EV $1,100M ÷ Revenue $400M = 2.75x
-
Price/Book = Market Cap ÷ Book Value of Equity
- Example: Market Cap $1,200M ÷ Book Equity $480M = 2.5x
-
PEG Ratio = P/E ÷ Expected Earnings Growth Rate
- Example: P/E 20.0x ÷ 12% expected growth = 1.67 PEG (lower PEG = better value)
Selecting comparable companies
Peers should match your target on several dimensions:
Industry/Sector: Same industry (software, pharmaceuticals, retail). If the target is a software-as-a-service (SaaS) company, compare to SaaS peers, not legacy software. If it's a drug manufacturer, compare to large-cap pharma, not biotech early stage.
Business Model: Revenue drivers should be similar. A subscription-revenue SaaS company should be compared to other subscription companies, not one-time license sales. A capital-intensive manufacturing company should be compared to peers with similar CapEx requirements.
Geographic Exposure: Currency and regulatory differences affect valuations. A UK-domiciled company with 80% UK revenue may trade at different multiples than a global company.
Size/Maturity: A $5B market cap company may not be directly comparable to a $100M startup in the same industry. Size drives profitability, capital efficiency, and risk profile.
Growth Stage: A high-growth company (30% revenue growth) typically trades at premium multiples to a mature, stable company (5% growth).
Peer Pool: Aim for 4–8 close comparables. With fewer than 4, a single outlier skews your average. More than 8, you're likely including weak comparables. If your target is unique (only company in its niche), acknowledge the limitation and use a broader peer group with adjustments.
Creating a peer selection table
Document why each peer is included and what adjustments might be needed:
Peer Analysis Justification
Peer Ticker Rationale Differences Adjustment
Competitor A AAA Direct market Smaller (0.8x size) -1.5% to valuation
competitor, same
geography, growth rate
within 2% of target
Competitor B BBB Similar market, +2% higher growth +2.0% multiple
same business model
Competitor C CCC Market leader, +3% margin higher +1.0% multiple
strong execution
Competitor D DDD Regional exposure, 30% geographic -2.0% multiple
same product mix difference
For example, if Competitor A is similar but slightly smaller, you might apply your comp median multiple at a -1.5% discount to account for size. If Competitor C is higher quality (better margins, growth), apply a +1% premium. These adjustments force you to think critically about why your target deserves a different multiple than raw peer data suggests.
Multi-year multiples analysis
Don't just compare current-year (2025) multiples. Analyze forward multiples (2026, 2027) and trailing multiples (prior years) to understand trend:
Multiples Trends
Company 2024 P/E 2025E P/E 2026E P/E Trend
Competitor A 21.2x 20.0x 18.5x Decreasing (earnings growth)
Competitor B 20.5x 20.2x 19.8x Stable
Competitor C 21.8x 21.0x 20.2x Decreasing
Target Company 21.5x 20.5x 19.5x Decreasing
Peer Average 21.3x 20.4x 19.5x Decreasing
A company with declining forward P/E is being re-rated as the market anticipates earnings growth. If your target's forward P/E is lower than peers, it may be under-valued (market is underestimating growth) or legitimately riskier.
Implied valuation using peer multiples
Once you've calculated peer multiples and your target's metrics, apply the peer median (or adjusted) multiple to your target's financials to derive an implied valuation:
Target Company Valuation Using Peer Multiples
Target Company Financials (Current Year):
Revenue: $420M
EBITDA: $105M
Net Income: $52M
Book Value of Equity: $450M
Shares Outstanding: 55M
Peer Comparison Multiples (Median):
P/E Ratio: 20.0x
EV/EBITDA: 10.0x
EV/Sales: 3.0x
Price/Book: 2.5x
IMPLIED VALUATIONS:
Using P/E Multiple:
Implied Equity Value = Net Income × P/E = $52M × 20.0x = $1,040M
Implied Price per Share = $1,040M ÷ 55M = $18.91
Using EV/EBITDA Multiple:
Implied Enterprise Value = EBITDA × EV/EBITDA = $105M × 10.0x = $1,050M
Less: Net Debt = $50M
Implied Equity Value = $1,000M
Implied Price per Share = $1,000M ÷ 55M = $18.18
Using EV/Sales Multiple:
Implied Enterprise Value = Revenue × EV/Sales = $420M × 3.0x = $1,260M
Less: Net Debt = $50M
Implied Equity Value = $1,210M
Implied Price per Share = $1,210M ÷ 55M = $22.00
Using Price/Book Multiple:
Implied Equity Value = Book Value × P/B = $450M × 2.5x = $1,125M
Implied Price per Share = $1,125M ÷ 55M = $20.45
Summary:
Average Implied Price = ($18.91 + $18.18 + $22.00 + $20.45) ÷ 4 = $19.89
Median Implied Price = ($20.45 + $18.91) ÷ 2 = $19.68
Range: $18.18 to $22.00
If the stock currently trades at $20, it's near the median implied valuation—fairly valued relative to peers. If it trades at $17, it's 12% below implied value (potentially undervalued). If it trades at $24, it's 22% above implied value (potentially overvalued or trading on unique growth/quality factors).
Adjusting multiples for growth and quality
Peer multiples provide a baseline, but your target company may deserve a premium or discount based on:
Growth Rate Difference: High-growth companies command higher multiples. If peers grow at 8% and your target grows at 12%, apply a +20% to +30% multiple premium. Use PEG (P/E ÷ Growth) to normalize for growth differences.
Competitor A: P/E 20.0x, 8% growth → PEG = 20.0 ÷ 8 = 2.5
Target Company: P/E 20.5x, 12% growth → PEG = 20.5 ÷ 12 = 1.71
Lower PEG suggests the target offers better value on a growth-adjusted basis.
Profitability/Margin Difference: Higher-margin businesses deserve premium multiples. If your target's EBITDA margin is 25% vs. peer average 22%, apply a +10% multiple premium.
Market Position/Competitive Advantages: Market leaders with durable competitive advantages (network effects, switching costs, brand) trade at premium multiples. If your target has a 40% market share with high switching costs, a +15% multiple premium is defensible.
Risk Profile: More volatile, leveraged, or illiquid companies trade at discount multiples. A private company might trade at a -20% to -30% discount to public comparable multiples due to illiquidity. A highly leveraged company might trade at -15% discount due to financial risk.
Capital Efficiency: Companies with higher ROIC (return on invested capital) command higher multiples. If your target's ROIC is 15% vs. peer average 12%, apply a +10% premium.
Document all adjustments:
Adjusted Peer Multiple Analysis
Base Peer Median EV/EBITDA: 10.0x
Adjustment for Higher Growth (+12%): +1.2x
Adjustment for Better Margins (+8%): +0.8x
Adjustment for Market Position (+10%): +1.0x
Less: Adjustment for Higher Leverage (-5%): -0.5x
Justified EV/EBITDA Multiple: 11.5x
Implied Enterprise Value = EBITDA $105M × 11.5x = $1,208M
Less: Net Debt $50M = Equity Value $1,158M
Implied Price per Share = $1,158M ÷ 55M = $21.07
Reconciliation: DCF vs. relative valuation
A professional valuation reconciles intrinsic value (DCF) with relative value (multiples). If they diverge significantly, investigate:
Valuation Summary
DCF Intrinsic Value (Base Case): $20.50 per share
Relative Value (Peer Median Multiples): $19.89 per share
Relative Value (Adjusted Multiples): $21.07 per share
Average of Three Methods: $20.49 per share
Current Stock Price: $19.50 per share
Upside to Fair Value: 5%
If DCF says $20.50 but peer multiples imply $19.89, you're likely underestimating margins or growth in the DCF (leading to higher relative value) or overestimating terminal growth in the DCF. Investigate and align your assumptions.
If peer multiples are significantly lower than DCF, consider:
- Is your WACC too low? (Increasing WACC reduces DCF value)
- Is your terminal growth too high? (Decreasing terminal growth reduces value significantly)
- Are peers trading at a discount due to near-term risks you've underestimated?
Real-world example: Comparing health-care software companies
Value a health-care software company trading at $50 using both DCF and multiples:
DCF (Base Case): Revenue growing 18%, operating margins expanding to 28%, WACC 7.2%, terminal growth 3%. Result: Intrinsic value $52 per share.
Peer Multiples:
Company Revenue EBITDA Market Cap P/E EV/EBITDA
Peer A (Conmed) $450M $90M $2,700M 27.5x 10.2x
Peer B (Veradigm) $800M $140M $3,500M 23.2x 9.8x
Peer C (Infor) $3,500M $800M $12,000M 21.0x 9.5x
Target Company $420M $105M ?? ?? ??
Peer Median: P/E 23.2x, EV/EBITDA 9.8x
Target's Net Income: $42M (10% net margin) Implied Value using P/E 23.2x: $42M × 23.2x = $975M → $19.50 per share (assuming 50M shares)
Target's EBITDA: $105M Implied EV using 9.8x: $105M × 9.8x = $1,029M Less: Net Debt $100M = Equity Value $929M → $18.58 per share
Relative value implies $18–$19.50 per share, but DCF implied $52 per share. Huge discrepancy. Why?
Investigation:
- Are peers' growth rates lower? If peers grow 8% but target grows 18%, the premium is justified.
- Are peers more profitable? If peers' operating margins are 20% vs. your 28%, the target commands a premium.
- Is your target's terminal growth unrealistic? 3% terminal growth assumes health-care software maintains 18% growth for 5 years then 3% forever—aggressive.
If you lower terminal growth to 2% and reduce revenue growth to 15%, DCF valuation drops to $35–$40. This aligns better with relative value—the target isn't worth $52 but fairly valued at $35–$40 with premium growth assumptions.
Common mistakes
Mistake 1: Selecting non-comparable peers Using a large-cap, profitable tech giant as a comparable for a high-growth, unprofitable SaaS startup is apples-to-oranges. Stick to peers with similar growth rates, margins, and business models.
Mistake 2: Ignoring outliers in peer data If eight peers have P/E ratios of 18–20x but one has 45x, investigate. Is that outlier a special case (merger pending, accounting issue) or indicative of missed risk? If it's a true outlier, exclude it and use median instead of mean.
Mistake 3: Over-adjusting multiples Apply adjustments carefully. Adding +10% for growth, +10% for margin, +10% for market position, and +10% for capital efficiency = +40% total. If you're adjusting by more than ±20% from peer median, question whether you're just reverse-engineering a target valuation.
Mistake 4: Not reconciling DCF and relative valuations If DCF and multiples diverge by >20%, it's a red flag. Either your DCF assumptions are off (too aggressive growth, too low WACC) or the peers are mispriced, or your company is genuinely different. Dig into the discrepancy; don't ignore it.
Mistake 5: Using outdated peer financials Peer multiples shift as growth rates, profitability, and risk profiles change. Update peer data quarterly. A peer acquired in Q2 should be removed from your comparison (acquisition changes trading multiples).
FAQ
Q: What's the difference between trailing and forward multiples? A: Trailing uses historical financials (last 12 months of earnings). Forward uses estimated future-year earnings. For a growth company, forward multiples are lower (market is pricing in rapid earnings growth). For a declining company, forward multiples are higher. Use forward multiples to compare on a normalized basis.
Q: Should I use mean or median multiples from peers? A: Median is more robust (outliers don't skew it). Use median as your base, but report mean as well. If median and mean differ by >10%, you have outliers; investigate them.
Q: How do I handle industry-specific multiples? A: Banks use Price/Book and Price/Tangible Book. Real estate uses Price/Net Asset Value. Utilities use Dividend Yield. Use industry-standard multiples for fair comparison. If you're comparing companies across industries, use universal multiples like EV/EBITDA or Price/Sales.
Q: What if I only have 2–3 good comparables? A: Acknowledge the limitation. With 2–3 peers, a single outlier skews results. Report the range and note that your relative valuation has higher uncertainty. Consider expanding the peer set to 4–6 companies, even if some comparables are less-than-perfect matches.
Q: Can I use multiples from M&A transactions? A: Yes, especially for private companies. If comparable companies were recently acquired at 8x EBITDA, that's market evidence of valuation. However, M&A multiples may include synergy value, not available to a standalone buyer, so they can be high. Use M&A multiples as a secondary check, not primary.
Q: How do I adjust multiples for currency differences? A: Convert all currencies to a common base (e.g., USD) using current exchange rates. Note that a euro-denominated company's multiples might differ from USD due to regulatory, tax, or economic differences. If comparing across currencies, acknowledge the risk.
Related concepts
- P/E expansion/compression occurs when market sentiment shifts (higher risk premium → lower multiples; better confidence → higher multiples). Predict future multiples, not just current ones.
- Justified multiple from DCF shows what a multiple should be given growth and discount-rate assumptions. Compare to actual market multiples to identify mispricing.
- Peer screens (e.g., "software companies growing >15% with >25% margins") narrow your comparable set to truly similar companies.
- Trading multiples vs. takeover multiples differ; a public company might trade at 12x EBITDA but sell in a merger at 10x (synergy discounts) or 13x (strategic premiums).
- Dividend discount model (DDM) is a valuation method complementary to DCF and multiples; use all three for triangulation.
Summary
A multiples comparison sheet translates peer trading data into relative valuation estimates. Select 4–8 comparable companies matched on industry, business model, size, and growth. Calculate key multiples (P/E, EV/EBITDA, EV/Sales, Price/Book), note differences vs. your target, and apply adjustments for growth, profitability, or risk. Use peer median multiples as a baseline and adjusted multiples as your best estimate. Reconcile relative valuation with absolute DCF valuation; significant divergences reveal assumption issues or genuine mispricing.