How do you pick comparable companies?

Start from the business model, not the industry label, then filter on size, growth, margins and geography. Build the long list from filings, research and a screen, keep five to ten close peers, and drop outliers like a company under a takeover offer.

Updated October 20, 2026

What the interviewer listens for

• Do you lead with the business model, not just the industry?
• Do you filter on size, growth, margins and geography?
• Do you know where a peer list comes from?
• Do you prefer a few close peers and tier the rest?
• Do you check outliers and prices distorted by a bid?

Common mistakes

• Picking peers by industry alone.Growth, margins and business model drive multiples, so a same-industry peer with a different model misleads.
• Ignoring size.A $300 million company and a $30 billion one face different risks and usually trade at different multiples.
• Padding the list to look thorough.Twenty loose peers give a range wide enough to support any number.
• Keeping a company with a pending acquisition, whose share price reflects the offer rather than the business.

Likely follow-ups

• What if there are no good public comps?I'd widen to companies with similar economics in nearby industries, lean more on precedent transactions and the DCF, and present the comps only as a rough check.
• Can private companies be trading comps?No, they have no share price. One can show up in precedent transactions if it was acquired and the price was disclosed.

More finance technicals

• What is a football field chart, and how do you use it?
• The discount rate goes up by a point. What happens to the DCF, and which hurts more: that, or terminal growth falling by a point?
• What long-term growth rate would you pick for a DCF, and why not 6%?
• Do unfunded pensions or leases belong in enterprise value?
• What multiples would you use for a bank, a REIT, an oil producer and a software company?

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