The football field
Read firstTrading comps. Valuation without accounting is memorization.
The chart does most of the teaching here. A puts every valuation method on one axis as a horizontal range, with the current share price drawn through them. It is the picture that turns four separate analyses into an argument.
What it is for
Not to produce a number. To show where the methods agree and where they do not, and to make the width of each range visible. A method with a very wide bar is telling you it has little to say, and a method with a narrow bar is either genuinely precise or hiding a range of assumptions inside one line.
How to read it
- Overlap. Where three or four bars overlap is the part of the range every method supports. That interval, not its midpoint, is the answer.
- The outlier. One bar sitting away from the rest is the interesting one. Either that method is capturing something the others miss, or it has an assumption that needs checking. Both are worth a sentence.
- Where the price sits. Below every bar means the market disagrees with all of your work, which is possible and worth being suspicious about. Inside the overlap means the market is priced roughly where the methods say, which is the usual and least interesting result.
- Width. A range should come from the sensitivity grid, not from rounding. A comps range should be the 25th to 75th percentile, not the low to high. Ranges built two different ways are not comparable widths.
Test yourself
01Your DCF range sits entirely above every market-based method. What does that mean?
That your forecast is more optimistic than the market's, and you should be able to name the specific assumption responsible. Usually it is margin or terminal growth. It could genuinely be a disagreement worth having, and it is more often a model that was tuned until it produced a number someone wanted. The way to tell is to back out what growth the current price implies and ask whether you would defend the gap.
02Why are precedent transaction ranges usually higher than trading comps?
Because acquirers pay a , usually 20% to 40%, for the right to run the business and to capture synergies nobody else can. Trading comps price a minority stake in a business someone else controls. Comparing the two directly and concluding the stock is cheap ignores that you would be buying the wrong thing.
03Should you average the methods into one number?
No, and the chart exists so you do not have to. Averaging a DCF with a comp set produces a number that no method supports and that hides the disagreement, which was the informative part. Show the ranges, say which method you weight most and why, and let the reader see the spread.
Every figure in this lesson that names a company comes from Target Corporation's Form 10-K for Fiscal 2025, the year ended 2026-01-31, filed 2026-03-11. Educational material, not investment advice.