Comps

A benchmark helps answer a practical question: what is this asset worth, or how much has this operation changed? The benchmark is only as strong as the similarity between the items.

In residential appraisal, an appraiser selects recently sold properties resembling the subject in location and physical features, and FHFA describes selection, adjustments and reconciliation of adjusted sale prices as the sales-comparison approach. A nearby sale is not automatically comparable, because different square footage, renovation, lot, sale date or transaction conditions may require an adjustment or make a property unsuitable.

If a comparable has a feature the subject lacks, its sale price may be adjusted downward for comparison, and the adjustment estimates the feature's market contribution, not necessarily its construction cost. Several sales can produce a range rather than a single obvious value, so the appraiser weighs quality and comparability before reconciling a value conclusion.

An asking price is not the same as an observed completed sale, and listing evidence may provide context but treating it as identical to a closed transaction can distort the estimate. A business analyst uses a different type of comp: public companies with similar activities, growth and risk, whose ratios such as enterprise value to EBITDA (earnings before interest, tax, depreciation and amortisation) or price to earnings can be compared with a target firm.

Capital structure matters, because enterprise-value multiples compare the value of operations while equity-value multiples use a share price or market capitalisation, and mixing the numerator and denominator produces a meaningless number. A company's high multiple may reflect growth or lower risk rather than a universally better price, so peer selection and adjustments for margins, geography, accounting and debt deserve inspection.

The retail use of comps has a different purpose: comparable-store sales aim to track changes at stores that meet a chain's inclusion rules, removing some noise from openings and closures. A chain can report rising total revenue while comp sales fall if new stores drive expansion, and then the existing-store trend tells a different story from the consolidated sales line.

Comp-store definitions can differ across firms, as one chain may require a store to be open twelve months while another may exclude renovations or include online fulfilment differently. Comparing growth percentages requires a consistent base period, since a holiday calendar shift, currency change or unusually strong prior period can influence the interpretation.

The same adjective comparable does not prove comparability, because a condo sale, a listed retailer and an existing shop are each a comp for different questions, with different inputs and caveats. Always name the target, the peer set, the selection rule and the adjustment method, which makes the benchmark reproducible and lets a reviewer challenge weak assumptions.

Good comp work explains both inclusion and exclusion, noting why a seemingly similar property or company was rejected, not only why the chosen observations look persuasive. Comps are a decision aid, not a guaranteed sale price or investment return, because market conditions can change between observed transactions and the future decision.