What are some flaws with Comparable Companies?
Answer
Aside from no company being perfectly comparable to another, the stock market is emotional and fluctuates by the day. Don’t be afraid to keep this one short but if they ask for follow ups you can say that no company has the same capital structure and has a myriad of different competitive advantages and disadvantages.
Why this matters to bankers
All valuation methods have flaws. Bankers must have a strong understanding of them to refine their approach.