Step 8 of 11

How to compare with similar companies

A number means more next to the same number from companies in the same business.

Click any Tap any word with a dotted underline to see what it means.

Is a 10% profit margin high or low? It depends on the industry. Supermarkets usually work with thin margins, while software companies often keep much more of each sale. Comparing a company with similar ones turns its numbers into something you can read.

What to look at

• The sector median next to a metric: is the company above, below or close to the middle of its sector?
• Direct competitors side by side: companies that sell similar things to similar customers.
• The same metrics over the same years, so the comparison is fair.

Questions to ask yourself

• Why might this company's numbers differ from its competitors'? Its size, its business model, a different mix of products?
• Has the difference been there for years, or did it appear recently?
• Am I comparing companies that are actually similar? One sector can hold very different businesses.