How do you determine the appropriate peer group?
A core Valuation interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Start with same industry (SIC/NAICS), then filter by: similar size (revenue/market cap within 0.5–2x), geography, growth profile, margin structure, business model. Typically 6–12 peers. Remove outliers. If the target is unique, broaden criteria but disclose why. The peer group is always challenged – be ready to defend your choices.
WHAT INTERVIEWERS LISTEN FOR
- ✓Start with same industry
- ✓Filter by size, geography, growth
- ✓Target 6–12 peers
- ✓Remove outliers
- ✓Defend peer group choices
COMMON MISTAKES
- ✗Only using industry without filters
- ✗Including too many or too few peers
- ✗Ignoring business model differences
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