TRADING COMPS MODELLING EXAM
WALL STREET PREP 2024
DISTINCTION GUARANTEED
1. What is a Trading Comps Analysis?
Answer: Trading Comps, or comparable company analysis, is a valuation method used to
evaluate a company's value relative to similar companies in the same industry. It involves
comparing financial metrics like P/E ratios, EV/EBITDA, and EV/Sales among peer companies.
2. How do you select comparable companies?
Answer: To select comparable companies, you should consider factors such as industry, size,
geography, growth rates, and business model. The goal is to find companies with similar
characteristics to ensure the comparison is meaningful.
3. What are some key multiples used in Trading Comps?
Answer: Key multiples include:
● P/E Ratio (Price to Earnings): Market price per share divided by earnings per share.
● EV/EBITDA (Enterprise Value to EBITDA): Enterprise value divided by earnings before
interest, taxes, depreciation, and amortization.
● EV/Sales (Enterprise Value to Sales): Enterprise value divided by total sales or
revenue.
4. How do you adjust for differences between the company being valued
and its comparables?
Answer: Adjustments may be made for differences in growth rates, profitability, capital
structure, and size. For instance, if a comparable company has higher growth prospects, its
valuation multiple might be higher.
WALL STREET PREP 2024
DISTINCTION GUARANTEED
1. What is a Trading Comps Analysis?
Answer: Trading Comps, or comparable company analysis, is a valuation method used to
evaluate a company's value relative to similar companies in the same industry. It involves
comparing financial metrics like P/E ratios, EV/EBITDA, and EV/Sales among peer companies.
2. How do you select comparable companies?
Answer: To select comparable companies, you should consider factors such as industry, size,
geography, growth rates, and business model. The goal is to find companies with similar
characteristics to ensure the comparison is meaningful.
3. What are some key multiples used in Trading Comps?
Answer: Key multiples include:
● P/E Ratio (Price to Earnings): Market price per share divided by earnings per share.
● EV/EBITDA (Enterprise Value to EBITDA): Enterprise value divided by earnings before
interest, taxes, depreciation, and amortization.
● EV/Sales (Enterprise Value to Sales): Enterprise value divided by total sales or
revenue.
4. How do you adjust for differences between the company being valued
and its comparables?
Answer: Adjustments may be made for differences in growth rates, profitability, capital
structure, and size. For instance, if a comparable company has higher growth prospects, its
valuation multiple might be higher.
