How to compare a company with its competitors
Compare inside an industry, adjust for debt, and look at the trajectory rather than the snapshot.
Work out which of two rivals is the better business, and which is the better price.
How to compare a company with its competitors works, in one picture
The same argument as the text, as a chain. Each step is what makes the next one possible.
The divergence that precedes most disasters
Reported profit climbing while the cash it supposedly generated goes nowhere. Either customers are not paying, or the sales were never really made.
- 1
Never compare across industries
A P/E of 12 in software and a P/E of 12 in mining are not the same fact. Capital intensity, margins and cyclicality differ so much that cross-sector multiple comparison is close to meaningless.
- 2
Use enterprise value, not market cap
Buy a company and you inherit its debts and keep its cash. Two firms with identical market caps can cost wildly different amounts to actually own. Enterprise value adjusts for both, which is why acquirers think in it and retail investors mostly do not.
- 3
Separate the two questions
CompareWhich is the better business (higher, more durable returns on capital, better margin trend, less debt) is a completely different question from which is the better price. Conflating them is how people talk themselves into cheap rubbish.
SteadyShares's Compare tab puts a company against its sector peers, quarter by quarter and year by year, and marks the winner on each row so the pattern is visible rather than assembled.
- 4
Index the revenue lines and watch them diverge
Set both companies to 100 at the start of the period. A snapshot tells you where they are. The trajectory tells you who is taking share, and share is what you are actually buying.
Ordinary. The market expects steady, unremarkable growth.
You can name the better business and the better price, and be comfortable that they are different companies.
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Compare inside an industry, adjust for debt, and look at the trajectory rather than the snapshot.
1,100+ companies across 17 exchanges, filtered on any combination of moat, valuation, growth and debt.