There are multiple methods investment bankers and other financial analysts use to value a company. One frequently employed relative value method is comparable company analysis. Comparable company analysis is especially useful when valuing the minority, non-controlling interest of a company.

Comparable company analysis is rooted in the idea that companies with similar characteristics should have similar valuation multiples. Typically, a group of comparable companies includes companies from the same industry as the company being valued and companies with similar fundamentals.

In finance, investing, and business in general, valuation is a key skill. Markets set prices, but applying an accurate valuation to assets being priced in that market can provide insight into how accurate that market pricing is. However, all valuations are biased and based on many assumptions. Therefore, valuation is less of a precise method to determine the “correct” price, but rather more of an art that is a useful tool for evaluating an asset. Valuation models can be very quantitative and complex, but more quantitative models are not always better. Frequently, the …