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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Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
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