First, we would seek to understand the industry by reading through industry research and equity research reports, as well as the annual report / 10k. Competitors are often listed here which could be good comparables.
Comparables should have a similar business model and play in similar sectors. Also, it’s ideal if they are in a similar geography.
After creating a list of potential comparables, we would look at other metrics that measure size and profitability. In terms of size, we would look at the market cap, enterprise value, and revenue, and exclude any that are way off.
To assess profitability, we would look at gross margin, EBITDA margin, and net income margin, and exclude any that are way off.