Peer group

A peer group is the set of other companies a stock's ratios are compared against to judge whether it looks cheap, expensive, or fairly valued. A P/E or EV/EBITDA multiple means very little on its own, it only becomes useful once measured against companies genuinely similar enough to make the comparison fair.

A real peer group holds up on business model, size, growth and margin profile, and where each company sits in its corporate life cycle. Grouping companies together only because they share a size bracket or a sector label, "big tech," for example, is a common shortcut that produces a comparison that looks precise and means very little.

When a company does not have a clean peer, two techniques help: triangulating with partial peers that genuinely overlap on part of the business, or checking how a similar company's own multiple looked at a comparable stage of its history.