Comparable company analysis (“comps”) is a valuation method that allows companies to be valued based on financial ratios of similar businesses. CFI’s airline industry comps template provides a number of companies that can be used to value American Airlines Group Inc., a company in the airline industry.
Comparable company analysis is useful since it is simple and generally involves fewer assumptions compared to other valuation methods. In this airline industry comps template, you can easily see items such as EV/EBITDA and EV/Revenue of the industry to be used in this comparative analysis.
Choosing Comparable Companies
The most important step in a comparable company analysis is selecting companies that are relevant to the company you want to value. There are a number of factors that can be taken into consideration when choosing companies for the analysis. CFI’s airline industry comps template considers these factors:
Since this template is specifically looking at the airline industry, industry classification is automatically matched for each of the companies. Size and geography are relatively straightforward to match. The last three factors: growth rate, profitability, and capital structure involve a few extra steps to match. These factors involve assessing the financials of each of the companies.
To keep this template simple, size and geography have been prioritized when determining comparable companies. This template includes the following characteristics:
Similar size and geographical coverage
Similar size and different geographical coverage
Different size and similar geographical coverage
Companies with similar business models
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