Cockpit
Statements
Peer Universe
Definition
Peer Companies are comparable companies relevant for indexing operating performance. A group of peer companies is called Peer Universe.
Description
The perspective of indexed operating performance is the one of an investor, since the aim of indexing is to measure value generation. This value performance is determined by investors’ behavior. If an investor considers another company as an alternative investment opportunity with similar operating risks, this company is a peer company, because differences in operating performance will lead to changes in investor behavior and thus result in valuation differences.
The identification of relevant peers requires a thorough understanding of appropriate financial databases. Obermatt has years of specialized experience working with several leading financial databases and has extensive experience in the composition of Peer Universes (we also leverage our existing Peer Universes in the Obermatt Bonus Index). We compile the first version of your Peer Universe free of charges (contact us for your Universe).
Typically for each company and for each business division, a proper Peer Universe is generated. The compilation on the basis of industry codes such as SIC, GICS or NAICS alone is not sufficient, as these codes will produce peers which have similar products. Obermat conducts further customization in order to develop Peer Universes which reflect the investor's view.
Application
Peer Universes are custom-built per company depending on the requirement of analysis. Thus for one company, different peer companies could be relevant for the sales analysis than for the analysis of capital efficiency of the same company. Obermatt builds between three and eight Peer Universes per company and business division.
The Peer Universe is validated by Operating Trends. Parallel developments of Operating Trends indicate that the peers are similar from an investor perspective. This means that the Peer Universes of similar Operating Trends could be consolidated for indexed operating performance assessment. Obermatt determines whether this is the case, individually with each client and the responsible manager.
Examples
Peer Universe samples are available in Obermatt‘s Alpha Shops and the Obermatt Bonus Index.
Book recommendation: Marktorientiertes Value Management, 2007, Wiley (order)
Obermatt is specialized in the composition of Peer Universes. Contact us for your custom-built Peer Universe.