Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Analyst valuations – it’s always cheap relative to something else!

Analysts appear to relish assessing companies relative to peer group.
Without mentioning names here is an extract from something I received today:

Relatively cheap compared to principal listed comparator

…we can see that ‘Company A’ December 2008 P/e of 17.7x is only fractionally ahead of the sub sector average (16.9x) and well behind that of ‘Company B’ (20.7x). Given a superior product and a more diversified customer base we believe ‘Company A’ should trade at a premium to the sector and we remain buyers.

So the analyst concludes that Company A is a ‘buy’ simply because it is trading at a big discount to another ‘similar’ company in the sector. Never mind that Company A and Company B are very different in size, quoted on different markets and that the sector in question has been concocted by the broker and doesn’t actually formally exist.

That’s my Friday whinge out of the way!


Investor's Champion is a registered trade mark of Investors Champion Ltd.  Investor’s Champion Limited is a company registered in England and Wales under number 03577867 whose registered office is at Langwood House, 63-81 High Street, Rickmansworth, Herts WD3 1EQ. Investor’s Champion Ltd is associated with Fundamental Asset Limited who is authorised and regulated by the Financial Services Authority.