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Independent Peer Groups & Clones
TRADITIONAL APPROACHES TO PEER GROUP ANALYSIS
RELY HEAVILY ON INDUSTRY. While these techniques have valid
applications, DeMarche Clone Analysis improves on this process
by focusing on factors ( >>
Learn More ) that are more reflective of a buy-side
investment manager and your competitors for capital.
DeMarche Clone Analysis is based on 30+ years
of investigating and evaluating institutional investors. Our
goal is to narrow the universe of 10,000 stocks to a handful
of companies that are most like yours based on industry, financial
and growth factors. These companies are your true competitors
for capital because they are most like yours in the eyes of
institutional investors.
DEMARCHE PEER UNIVERSE
We narrow the universe further to create your DeMarche
Peer Group, which is comprised of the
companies most similar to yours when combining your financial,
growth and industry peers. We tighten the constraints and
parameters in order to assemble a group of Company Clones.
APPLICATIONS OF DEMARCHE CLONE ANALYSIS
Identifying your true competitors
for capital provides a powerful tool for making strategic
decisions about your company. Some of the applications of
this information are noted below.
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Evaluate performance |
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Benchmark for executive
compensation |
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Basis for P/E analysis |
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Institutional investor
targeting |
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Better
database for researching corporate finance decisions |
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Cost of equity capital |
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Stock splits |
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Stock repurchase |
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Capital structure |
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Dividend policy |
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Relative valuation |
BUILDING A PEER UNIVERSE
Your Clone Universe is made
up of your company's financial, growth and industry peers.
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FINANCIAL PEERS |
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Financial peers are based on
growth/value, aggressive/defensive and market capitalization
characteristics. Value stocks generally have higher
relative book-to-price, sales-to-price and cash flow-to-price
ratios than growth stocks. Growth-oriented stocks generally
have higher valuation ratios and typically exhibit higher
than market earnings and dividend growth.
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VALUE
TO GROWTH SPECTRUM
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Value Stocks
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Factor
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Growth
Stocks |
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High
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Book-to-Price
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Low
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High
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Sales-to-Price
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Low
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High
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Dividend Yield
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Low
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High
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Cash Flow Yield
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Low
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Low
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Dividend Growth
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High
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Low
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Asset Growth
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High
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Low
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Earnings Growth
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High
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Low
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Relative Price Strength
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High
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We have also identified investors'
tendencies to be aggressive or defensive in the way
they construct portfolios. Aggressive stocks are more
volatile with high debt to equity, wide trading ranges,
and high earnings variability. Defensive stocks are
larger, have higher profit margins and higher cash flow
and dividend yields.
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AGGRESSIVE
TO DEFENSIVE SPECTRUM
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Aggressive Stocks
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Factor
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Defensive Stocks
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High
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Debt to Equity
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Low
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High
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Trading Range
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Low
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High
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Share Turnover
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Low
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High
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Market Risk
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Low
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High
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Earnings Variability
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Low
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High
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Non-Market Risk
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Low
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Low
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Market Cap Size
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High
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Low
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Payout Ratio
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High
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Low
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Economic Return
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High
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Low
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Cash Flow Yield
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High
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Low
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Dividend Yield
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High
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Low
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Profit Margin
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High
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GROWTH PEERS |
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Growth Peers
are based on the IBES Long-Term Expected Growth Rate,
which is the annualized EPS over the next three to five
years. Trailing EPS growth, growth in net income, sales
and dividends may also be considered. |
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INDUSTRY PEERS |
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Industry peers can
be defined on a sliding scale. In the narrowest sense,
industry peers are companies that are competing in the
same marketplace. In the broadest sense they are companies
that have similar sensitivities to various macroeconomic
factors. |
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