The comparable company analysis is a relative valuation method that evaluates a company's worth by comparing its valuation multiples to peers. It is advantageous due to the availability of data and ease of calculation but has disadvantages, including the potential influence of market conditions and difficulty in finding suitable comparables. This method is broadly used by analysts, investment bankers, and private equity investors to gain insight into market assumptions about company valuations.

1. Describe the Comparable Company Analysis valuation method including advantages and
disadvantages.
Solution
Comparable Company Analysis are relative valuation technique used to value a company by
comparing that company's valuation multiples to those with peers company's. Generally
multiple are ratio of some valuation metric (such as equity market capitalisation or Enterprise
Value) to some financial metric (such as Earnigs/ Earnings per share (EPS), Sales, EBITDA). All
other things being equal, The basic idea is that companies with similiar characteristics should
trade at similiar multiples.Its is relatively easy to perform and data for them is widely available(
If comparable company is publicly traded.) If market is pricing securities of other companies
efficiently, this method shouyl provide a reasonable valuation range, while other valuation
methods such as DCF are dependent upon an entire array of assumptions. Due to this factor this
technique is used widely for valuation. Market Analyst,Investment bankers,sell side reasearch
analysts and private equity investor use them.AdvantagesDisadvantages.Widely available data so
easy to calculate.Infuenced by temporary market conditions or non fundamental factors.Easy to
communicate across variety of market participants.Not useful when there are few or no
comparable compnies.Determines a benchmark value for multiples used in valuation.Difficult to
find appropriate comparable companies for many reasons.Provide useful way to assess market
assumptions of fundamental Characteristics baked into valuations.Less realiable when
comparable compnies arethinly traded.