The first step for P/E analysis is to find similar companies that operate in the same field as the company you are trying to value. Though you can never find a perfect match, you can narrow down your search using parameters like the same sector, geography, product & services, size, etc.
Once you find comparable companies, the next step is to adjust the corporate earnings across the peer group. Earnings is an accounting figure that includes non-cash items and non-recurring income.
It can also be manipulated by management. Therefore, the need to closely look at corporate earnings and adjust them if necessary. Let’s look at few such adjustments: Read more.