Welcome back to the Wall Street Prep Quick Lesson Series!
In the two-part lesson below, we’re going to walk through the single most common model in investment banking: the trading comparables (comps) model. The comps model is at once the most ubiquitous and the most straightforward model you’ll likely be asked to build as an investment banking analyst or associate.
Ready to Model? Before diving in to the videos below, be sure to download this lesson’s Excel model template: Simple Comps Template.
The Comps Model, Video 1
The Comps Model, Video 2
Comments
I have been following all the tutorials. They are very helpful! I am also interested in finding out how best a financial forecast model can be set up if one is considering to establish a new business. It should cover set up capital, cash flow, 10 year financial forecast, income… Read more »
Michelle,
Take a look at some of our webinars covering Cap Tables or the VC term sheet. These courses should provide some initial views on how to approach start-up private company modeling – thanks!
Thank you Haseeb! Where can I find these webinars?
Michelle,
Go to https://www.wallstreetprep.com/my-courses/
At the top of the page you should be able to click on “Webinars” – thanks!
Thanks Haseeb. But there is no “webinars” under my course. There is the only course I have enrolled in and nothing else. It would be easier to show you if I could send you the screen shots. Would appreciate if you help in this.
Thank you.
Michelle,
The webinar option might be restricted based on your subscription level – please reach out to [email protected] to clarify – thanks!
Thanks and helpful for me
Great to hear, Myo!
BB
How can I put the ‘x’ together with the multiples?
Hi, David,
It is a custom format. Hit Ctrl 1, and go to Custom format, then use the following: 0.0x_);(0.0x)
BB
The models are very helpful and Im very knowledgeable in Excel. However, with all of the tools that automatically do these calculation who still uses a manual version of excel?
Good question, Sarah. Lots of bankers now rely heavily on FactSet and CapIQ for the underlying information that they will use to calculate multiples, rather than going through all the company filings and entering the data. However: 1) There will be situations, like a fairness opinion or a presentation to… Read more »
If forecasts are unavailable, can the comps be done using just the LTM numbers? Especially if some work is done to normalize the historical FS.
PS. Thanks a lot for these lessons.
Hi, Jasper,
Yes, you can do a comps analysis just using LTM if no projections are available.
BB
How would a comp model of private companies change?
Carlos:
It would be the same but you would just need access to the private company financials.
Best,
Jeff
How would you apply a discount to the multiples based on the size of the private company?
Hi, H T, There is not way to know the appropriate discount in the abstract, it would have to be based on comparable data. But you might want to check out Damadoran’s work on this and other topics, because he walks through the theory and sometimes provides concrete discounts: For… Read more »
I am highly obliged by your support of 7 free lessons, extremely useful indeed. Definitely, enroll my self in some other couple of courses, later. Obviously, when I have money to buy those courses.
Thanks Matan.
Thanks very much, its very useful
Charles:
Thank you!
Best,
Jeff
if analyzing with Q3, the LTM would be the YTD Q3 current year + LY – YTD Q3 previous year?
Carlos:
Yes that is correct.
Best,
Jeff
So I have seen the first video of this tutorial. My doubt is how do we arrive at Year 1 forecast and Year 2 forecast of the comparable companies? Are they the previous year financials data or are these projected on certain assumptions?
For forecast data, we can usually find research estimates published from sell side equity research. We can easily obtain equity research forecasted data from Capital IQ. Forecast data may also be obtained from the company’s SEC filings such as the 10K. In general, these forecasts may be based on historic… Read more »
Thank you for the information!
Thank you for this tutorial. It is very educating. Keep it up.
Really the lesson is very helpful to take decision for investment.
Thanks a lot.
Regards,
KK Paul