This telecom industry comps template provides a guideline and example of what a comparables universe would look like for a company in the telecommunications industry. As an example, we are constructing a comparables universe for AT&T Inc. in this telecom industry comps template. For an example of another industry, check out CFI's retail industry comps template!
Comparable Company AnalysisComparable company analysis ("comps") is a method of valuation that compares financial ratios across multiple companies to value a business. Unlike the discounted cash flow (DCF) analysis, an intrinsic form of valuation, comps analysis is a relative form of valuation. This telecom industry comps template provides a simple look into the telecommunications industry. In many ways, comps analysis is simpler than DCF analysis. Comps analysis uses fewer assumptions. Conversely, DCF analysis uses assumptions to forecast each line item, with many moving parts in the model. Additionally, comps analysis is much easier to understand intuitively. The act of comparing things to determine values and make conclusions is a natural part of human behavior. By using this principle, comps tables simplify and make the valuation process easy to digest. Another benefit of comps analysis is that it helps capture the current market state. For example, there are often times when the market is down or the market is up. Therefore, if the market is up, this will be reflected in the comparable companies as well. This idea also applies to firms in cyclical industries, as the cyclical nature will be captured by all comparable companies. This helps compensate for one of the weaknesses of DCF analyses – that it is hard to forecast cyclical companies.
Choosing Comparable CompaniesWhen choosing comparable companies for a comps table, a financial 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 comparison points when choosing comparable companies. While it is not usually possible to match all of these points, this telecom industry comps template chooses companies that are comparable in some of these 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