1. Examine all companies filing with the SEC that share the same industrial classification code.
2. Review the firm’s annual report for specific competitors and industry publications for comparable companies.
1. Industrial Classifications
A good starting point when constructing a peer group is to identify companies operating in the same industry. The relevant industry can be determined by referring to the firm’s Standard Industrial Classification (SIC) code. A list of possible codes is available on the Securities and Exchange Commission’s website (here).
To search for comparable companies filing with the SEC, navigate to the EDGAR website (here). Select More Options under the Company Name heading. Type the SIC code in the appropriate field and click Search. The returned results will likely be more comprehensive than desired, including all ownership filings as well as acquired/terminated companies. As you peruse through each company, you can safely move on if you see only Form 3 or Form 4 filings. If the most recent filing date is more than a year ago, you are also free to ignore it.
Once you think you may have found a legitimate peer company, type “10-K” (or “20-F”) in the Filing Type box and click Search. Open up the most recent 10-K (or 20-F). The first page likely lists the name of the exchange on which it is registered. If that is the case, search for “symbol” or “under the symbol” using the find command (Ctrl-F). This should take you to the ticker symbol for the company.
2. Annual Reports and Industry Publications
Another great place to look for peer companies is within a firm’s annual report. These reports will include a discussion of the firm’s competitive environment and often cite specific competitors. This same process can then be repeated with competitors’ annual reports to identify additional comparable companies. Industry trade publications are also great resource for generating a peer group as they will generally include a list of industry leaders.
After a group of peer companies has been identified, confirm that each comparable company derives a significant portion of its revenue from the same business activity. Note that companies with multiple divisions may be included in more than one industrial category. It is possible for companies to share the same industry but not be relevant peers. Good candidates should be at similar stages of the business cycle, depend on similar drivers of demand, share the same type of cost structures, and have comparable access to financial capital.