Peer group
Also called: peers, comparable companies, comparables
A set of companies similar enough in products, customers, growth, returns and risk that their valuations can be compared.
A shared industry label is not enough: good peers sell similar things to similar customers and have similar economics. Use the median of a peer group rather than the average, and adjust for differences in growth, returns and debt before calling one company cheap.
Learn more in these lessons
- Comparing valuations with history and peersHow do you judge whether a share is cheap compared with its past and its peers?
- Comparable-company valuationHow do you value a company by comparing it with similar companies?
- Comparing companies in the same sectorHow do you compare companies fairly when no two are exactly alike?
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