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.