Trading comps
Read firstWhat a business is worth. Valuation without accounting is memorization.
A asks what a business is worth. Comps ask what the market is paying for businesses like it. The second question is easier, faster, and entirely dependent on the word "like", which is where all the work is.
The set, as filed
Five US retailers plus the target, using each company's most recent and a share price snapshot from 2026-08-17. Nothing has been adjusted for one-time items and the fiscal year ends do not all line up. Both of those are real comparability problems and they are left in on purpose.
| Market cap | Net debt | EV | EV/Rev | EV/EBITDA | P/E | |
|---|---|---|---|---|---|---|
| Target (TGT) | 68,800 | 10,968 | 79,768 | 0.76x | 9.7x | 18.6x |
| Walmart (WMT) | 917,155 | 26,845 | 944,000 | 1.34x | 21.4x | 41.9x |
| Costco (COST) | 424,117 | negative 8,373 | 415,744 | 1.51x | 32.5x | 52.4x |
| Kroger (KR) | 36,726 | 12,541 | 49,267 | 0.33x | 9.4x | 36.4x |
| Dollar General (DG) | 26,514 | 3,441 | 29,955 | 0.70x | 9.2x | 17.5x |
| TJX Companies (TJX) | 170,159 | negative 3,361 | 166,798 | 2.76x | 19.8x | 31.0x |
Each company's most recent Form 10-K on EDGAR. Share prices are consolidated tape closes for 2026-08-17 and will go stale.
Costco does not belong, and here is what it costs
Costco is a retailer by any classification you like. It is also a business that earns most of its profit from membership fees rather than from the margin on what it sells, and the market prices it as a subscription business. That shows up immediately: it trades at 52x against a set where the others sit far lower.
Build one
Toggle any company in or out and watch the quartiles move. Add your own if you have the figures. Nothing leaves your browser.
Which multiple, and when
- is the default, because it is unaffected by , tax position, and policy. It is also blind to capital intensity, so it treats an asset-heavy retailer and an asset-light distributor as equivalent.
- is what you fall back on when earnings are negative or too volatile. It only means something across companies with similar margins, because it is silent on whether the revenue is profitable.
- is the one everyone knows and the one most affected by leverage, because net income is after interest. Two identical businesses with different debt get different P/Es.
- EV/ sits between EV/ and P/E. It keeps the capital structure neutrality and does not pretend depreciation is free, which for capital-intensive businesses makes it the better of the two.
Test yourself
01How do you pick a comp set?
Business model first, then size, then geography, then growth and margin profile. Industry classification codes are a starting point and not an answer: two companies in the same SIC code can earn money in completely different ways. The test is whether an investor deciding between the two would treat them as alternatives. The follow-up is what you do when there are only three good comps, and the answer is that you use three and say so, rather than padding the set with companies you know do not belong.
02Why use median rather than mean?
Because comp sets are small and multiples have a long right tail. One company at 50x pulls a five-name mean far more than it moves the median. The demonstration below shows a real case where the mean and the median disagree by enough to change the conclusion. Median is the default, and reporting the quartiles alongside it is better than reporting either alone.
03Trading comps say $120 and your DCF says $180. What now?
Neither is wrong yet. Comps price the business the way the market prices its peers today, and a DCF prices the cash you think it will produce. A gap that large means either the market disagrees with your forecast, or the peer set is not comparable, or you have a real disagreement with the market that is worth stating. Work out which before picking a number, and put both on a football field so the reader can see the disagreement rather than the average of it.
A tutor that knows this lesson. It asks before it explains, and it will not tell you what to do with your own money.
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.