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101 Concepts for the Level I Exam

Concept 74: Peer Groups

A peer group is a set of comparable companies engaged in similar business activities. They are influenced by the same set of factors.

Steps in constructing a preliminary list of peer companies:

  • Use commercial classification systems. They often provide a useful starting point for identifying companies operating in the same industry.
  • Examine the subject company’s annual report. Companies frequently mention specific competitors in their annual reports.
  • Examine competitors’ annual reports to identify other potential comparable companies.
  • Examine industry trade publications to identify additional peer companies.
  • Confirm that each comparable or peer company has similar sources of sales and earnings.

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