This pharmaceutical industry comps template provides a look at a comps table would look like for a company in the pharmaceutical industry. In this example, we construct a comps table for Roche Holding AG. For an example of another industry, check out CFI's banking industry comps template!
Comparable Company AnalysisComparable company analysis ("comps") is a valuation method that uses financial ratios across multiple companies in the same industry to value a firm. Comps analysis is a relative form of valuation, whereas discounted cash flow (DCF) analysis is an intrinsic form of valuation. This pharmaceutical industry comps template will provide you with a simple and easy to understand look into valuation. In many ways, comps analysis is simpler than DCF analysis. Compared to DCF analysis, comps analysis uses fewer assumptions. DCF analysis uses assumptions to forecast each line item. Comps analysis is also much easier to understand intuitively. Comparing multiple things to determine value is a natural part of human behavior.
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. Financial analysts look at several points when building their comps table. Although it is usually not possible to match every point, it is important to keep them in mind when selecting a comps universe. Here are the comparison factors:
- 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