Chapter 9
Sizing Up the Industry
IN THIS CHAPTER
Creating a comparison set of peers for industry analysis
Seeing how companies differ from one another in key areas
Comparing and contrasting companies’ growth and other metrics
Measuring differences of companies’ profitability and valuation
Understanding why investment banking requires knowledge of the complete industry
The theory of relativity is a mind-blowing concept from Albert Einstein that says, among other things, that space and time are best understood in context to each other. The importance of comparison isn’t just heady science.
Consider what happens in a classroom. If a student gets an A on a paper, she may be overjoyed until she finds out that all the other students got A’s, too. Her A isn’t as meaningful when, in context, it’s not all that unusual. The dreaded “bell curve” is a way to separate the average students from the truly exceptional ones.
The importance of comparison doesn’t stop in the classroom. Even the super-rich ...
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