Comparing stocks within the same industry helps investors see whether a business is outperforming its competitors and deliver strong returns over the long term.
You’ll never truly understand how a business is performing until you see how the stock stacks up against other companies in its industry.
This guide covers how to quickly find a stock’s main competitors, compare key financial and valuation metrics, and evaluate the business quality of competitors so you can find strong businesses that are beating the competition and are undervalued compared to their peers.
Table of Contents:
- How to Find a Company’s Close Competitors
- Ask ChatGPT for a Quick List of Competitors
- Use TIKR’s “Competitors” Tab for a More Detailed View
- Compare Key Financial Metrics
- Evaluate Competitive Moats and Business Quality
- Analyze Valuation Multiples Side by Side
Let’s dive in!
Step 1: How to Find a Company’s Close Competitors
Before you compare stocks, you need to make sure you’re looking at the right competitors.
It’s important to analyze companies with similar business models that are also at similar stages in their growth cycles (Ex: growth businesses, mature businesses, businesses in decline).
Here are two of the easiest ways to find a stock’s closest competitors:
Ask ChatGPT for a Quick List of Competitors
If you’re researching a company and want a fast starting point, simply ask ChatGPT:
“Who are the main competitors of [Company Name]?”
You’ll get a quick overview of direct competitors. It’s a great way to identify key players without digging through filings or doing hours of research.
You might be thinking, “Can you really trust ChatGPT for stock research?”
ChatGPT can be a powerful starting point for this kind of stock research because it quickly pulls together well-known competitors based on publicly available information and industry knowledge. It’s perfect for getting a fast overview without digging through industry reports or Google searches.
That said, it’s always best to validate the results you get by asking ChatGPT to explain why these businesses are competitors. ChatGPT and other AI tools can be incredibly useful for speeding up your investment research when combined with proper due diligence.
Use TIKR’s “Competitors” Tab for a More Detailed View
TIKR makes finding competitors fast and easy with its Competitors tab.
TIKR shows a stock’s competitors across many of the different industries the company operates in. This helps to give a broad view of all the different kinds of comparable businesses a company has across its different business lines.
For example, if you’re analyzing Emerson Electric (EMR), TIKR will show the company’s competitors in key industries the business competes in, such as Electrical Equipment, Machinery, Electronic Equipment, Chemicals, and more.
Within the Electrical Equipment industry, for example, you can see that some of Emerson Electric’s competitors include Acuity (AYI), Generac (GNRC), and Fuji Electric (6504):
This tool also automatically displays key valuation metrics for the stock and its competitors, such as:
- EV/Revenue
- EV/EBITDA
- Forward P/E Ratios
- Free Cash Flow Multiple
- Market Cap
- Current Price vs Analyst Target Price
This gives you an instant view of whether a stock looks cheap or expensive relative to peers, which can save you hours of manual research.
Plus, if the company operates in multiple industries, you can easily toggle between sectors to get a full picture of the company’s competitive landscape.
By using ChatGPT and TIKR’s Competitors tab, you’ll quickly build a solid list of comparable companies.
The closer the competitors are in terms of operations, size, and growth stage, the more meaningful the competitor analysis will be.
See how you can analyze stocks quicker with TIKR (It’s free) >>>
Step 2: Compare Key Financial Metrics
Once you’ve found a small group of a stock’s competitors, the next step is to compare the financial performance of these businesses.
Strong businesses tend to show consistent results across a few key areas. Comparing these metrics side by side can help you spot industry leaders, identify underperformers, and narrow your focus to see which businesses have the best fundamentals.
Here are some of the core financial metrics to examine:
- Revenue Growth: Revenue growth tells you who is gaining market share or expanding into new markets. In industries with low overall growth, a company growing faster than peers may have a competitive edge.
- Profit Margins: Margins reveal how efficiently a company converts sales into profits. Compare gross, operating, and net margins to see who has pricing power, cost control, or structural advantages. For example, in the software industry, higher operating margins often signal strong recurring revenue models and lean operations.
- Return on Invested Capital (ROIC): ROIC measures how well a company turns capital into profit. It’s especially useful when comparing companies with similar capital structures. A higher ROIC often signals a moat or superior management. In capital-intensive industries, this can separate efficient operators from those burning cash.
- Free Cash Flow (FCF): Net income is important, but free cash flow shows what’s actually available to reinvest, reduce debt, or return to shareholders. FCF also helps you evaluate sustainability and financial flexibility.
- Debt and Liquidity: Even profitable businesses can run into trouble if they carry too much debt. Compare debt-to-equity ratios, interest coverage, and current ratios. Companies with clean balance sheets and solid liquidity tend to outperform during economic stress.
TIKR makes this comparison easy by displaying these financial metrics across selected peers in one table.
In just a few minutes, you can see which companies are generating better returns, managing costs effectively, and growing faster than their rivals.
Here’s how Emerson Electric’s return on capital stacks up against its competitors Acuity, Generac, and Fuji Electric:
Find high-quality businesses with strong competitive moats with TIKR >>>
Step 3: Evaluate Competitive Moats and Business Quality
Evaluating competitors’ business quality and competitive advantage can be even more important than comparing financial metrics.
If a company has stronger pricing power, higher customer retention, or a cost advantage compared to its competitors, it can make that business’s success more sustainable.
Here’s what to look for:
- Brand Strength and Customer Loyalty: Some companies command premium pricing because of brand recognition and customer trust. In consumer-facing industries, a strong brand often translates into higher margins and more stable cash flows.
- Switching Costs or Network Effects: In software, payments, or logistics, companies can create sticky ecosystems that make it expensive or inconvenient for customers to leave. These structural advantages often lead to higher lifetime customer value.
- Operational Efficiency: Look at consistency in return metrics like ROIC and ROA over multiple years. Strong operators maintain efficiency even during downturns. Weak operators see margins and returns compress quickly when the cycle turns.
- Industry-Specific Metrics: Each industry has unique drivers. Understanding and comparing these metrics can give you a sharper picture of a business’s competitive strength. For example:
- Retailers: same-store sales growth, inventory turnover
- Airlines: cost per available seat mile (CASM)
- Banks: net interest margin and non-performing loans
- Management Quality and Alignment: Does the leadership team have a long track record of execution? Are they buying shares or selling? Insider ownership, capital allocation decisions, and strategic consistency all signal the quality of capital stewardship.
TIKR makes it easier to track these qualitative factors. You can see trends in profitability, read management commentary, and benchmark quality metrics against direct competitors all in one place.
Step 4: Analyze Valuation Multiples Side by Side
Once you’ve compared the financial performance of companies in the same industry, and you understand which busineses might have competitive advantages, it’s time to assess how the market is pricing them.
Valuation multiples help you determine whether a stock is expensive or cheap relative to its peers. When used alongside fundamentals, they reveal which companies may be undervalued.
Here are some of the most commonly used valuation multiples you can use in competitor analysis for a stock:
- Enterprise Value to Revenue (EV/Revenue) Ratio: EV/Revenue can be helpful in industries with thin or inconsistent profits, such as biotech or early-stage tech. Look for high-growth companies with lower EV/Revenue multiples relative to their revenue expansion.
- Enterprise Value to EBITDA (EV/EBITDA): This multiple accounts for both a business’s debt and cash, making it more useful than the P/E ratio for comparing companies with different capital structures. It’s often preferred when analyzing asset-heavy industries like telecom, energy, or industrials.
- Normalized Price-to-Earnings (P/E) Ratio: The P/E ratio is useful for valuing mature, profitable companies. It can be helpful to compare it across its peers to see if a stock’s valuation is justified by its earnings growth and quality. A lower P/E ratio can indicate that a stock is undervalued if the business’s earnings are stable and reliable.
TIKR’s visualization tools help you compare stocks’ metrics side by side, so you can quickly assess whether a stock could be undervalued compared to its peers.
You can see that Emerson Electric trades at a slightly higher forward P/E multiple (17.4x) than its peers, with Acuity trading at a 13.6x multiple and Generac trading at a 14.6x multiple:
See how you can find undervalued stocks quicker with TIKR >>>
FAQ Section:
How do you compare two companies in the same industry?
To compare two companies in the same industry, start by analyzing key financial metrics like revenue growth, profit margins, ROIC, and free cash flow, then assess qualitative factors like brand strength and business model. Finally, compare valuation multiples such as P/E and EV/EBITDA to see if one of the stocks might be undervalued.
What metrics should you use to compare stocks?
Some common metrics used to compare stocks include revenue growth, EBITDA margins, ROIC, FCF, and debt levels. These core metrics reveal a company’s profitability, efficiency, and financial health. You can use valuation ratios to assess how the market is pricing each stock.
How do you know which stock is the best in its industry?
The best stock often combines consistent profitability, a durable competitive advantage, and a fair or discounted valuation. Use peer comparisons to spot the outlier that stands out on both fundamentals and price.
Is the P/E ratio enough to compare two stocks?
The P/E can be useful, but it’s usually not enough to compare two stocks on its own. Debt levels, earnings quality, and growth outlook matter too. It’s best to also look at EV/EBITDA, ROIC, and free cash flow metrics for a more complete picture.
What’s the best tool to compare stocks side by side?
TIKR is one of the best tools to compare stocks, because it provides a powerful peer comparison feature that lets you view valuation, profitability, and financial performance across companies in the same industry. It’s all in one place and fully customizable.
TIKR Takeaway
Comparing stocks within the same industry can help you identify the companies that are not only trading at a discount but also outperforming their peers operationally.
The TIKR Terminal offers industry-leading financial data on over 100,000 stocks, so if you’re looking to find the best stocks to buy for your portfolio, you’ll want to use TIKR!
TIKR offers institutional-quality research for investors who think of buying stocks as buying a piece of a business.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
