Use this cable industry comps template as a guideline for a comparable companies universe for Charter Communications Inc. Charter is an American telecommunications company that offers cable under their brand, Spectrum. To take a look at another industry, check out CFI's banking industry comps template!
Comparable Company AnalysisComparable company analysis ("comps") looks at financial ratios from multiple companies in the same industry to determine the value of a firm. Comps analysis is one of three common valuation methods, the other two being discounted cash flow (DCF) analysis and precedent transactions analysis. Unlike discounted cash flow (DCF) analysis, which is an intrinsic form of valuation, comps analysis is a relative form of valuation. This makes comps analysis similar to precedent transactions analysis in that they both look for external evidence to value a company. On a basic level, comps analysis is more intuitive than DCF analysis. Comps analysis uses fewer assumptions than DCF analysis. DCF analysis uses assumptions to forecast each line item. Comparing things to determine relative value is also a fundamental part of behavior, making this a simple concept to understand. Use this cable industry comps template to help you gain an understanding of comparable company analysis.
Choosing Comparable CompaniesWhen choosing comparable companies, an analyst must look for companies similar to the company they are valuing. If investors will pay a certain amount for similar companies, they should be willing to pay that amount for the company being valued. Analysts consider several important elements when building their comparables universe. Although it is unlikely that all points will match, it is still important to keep them in mind when selecting a comps universe. Here are the comparing metrics:
- Industry Classification
- Growth Rate
- Capital Structure
- Similar size and geographical coverage
- Similar size and different geographical coverage
- Different size and similar geographical coverage
- Companies with similar business models