Good comparisons match business model, scale, margin profile and growth. A cold-chain operator is not directly comparable with a courier company.
Industry analysis adds context: growth rate of the sector, regulation, and whether margins are expanding or shrinking across the industry.
An easy example
A logistics IPO at 34 times earnings sits between two listed peers at 38 and 30 times, which suggests pricing within the range of its comparison set.
Important note
The peer group named in the prospectus is chosen by the company. You can build your own comparison set.
Common mistake
Accepting the prospectus peer list without checking whether those companies really do the same thing.