Dissecting the Term ‘Comparative Market Analysis’
A comparative market analysis usually refers to a market analysis conducted on real estate to find and determine prices for homes. Basically, a real estate agent will look at what prices for similar homes were when they sold. Then, they can look at which way markets are trending. The agent can then come up with a value for a new home that is entering the market.
This makes perfect sense if you think about the term comparative market analysis. Comparative means comparing two different things, whether that’s the political system of two countries, or the value of two different stocks, or the value of two different homes. While a comparative market analysis is usually used for real estate, you can use the same principles while you conduct different types of market analysis.
Comparative Market Analysis is Not Just for Real Estate
For example, if you wanted to do a stock market analysis, you could look at how two similarly positioned companies are trading in regards to their stocks. For example, you might look at General Motors and Ford, two American companies that both enjoy similar positions in the market. You could look at their revenues, profit margins, debts, P/E ratios, and other indicators to compare them. You might find that Ford (or GM) is undervalued when compared to the other stock you are comparing it to. If so, Ford might end up being a good investment, at the very least it deserves a very close look.
Digging into statistics, data, and financial reports is one of the key jobs of any investor. It doesn’t matter if you’re a smaller investor saving up for retirement, or eying up a career working for a major financial firm. Study the numbers, dig into the data. Financial reports, sales trends, and other pieces of data is the bread and butter for many investors. Comparative studies between similar stocks in similar or identical industries can provide tons of key insights.
One thing to remember, however, is that every investor has access to this type of data. Generally, this means that markets are able to set correct prices on this rather “generic” prices. You can still find good deals occasionally by doing this type of comparative analysis, but before you go and sink your money into the stock, make sure you do a wider environment and news analysis. See if you can find any reasons why a stock is undervalued compared to its peers. Perhaps competitors have come up with better products and have a better future pipeline? Or maybe a scandal is unfolding that you don’t know about?
Other Market Analysis Templates
Market Basket Analysis
Another commonly used and potentially helpful term is market basket analysis. With this analysis, you basically look at consumers and try to judge what other products they will buy based on the products they already bought. For example, if you buy sugar you might be more likely to buy flour and perhaps chocolate chips.
While this term may not seem useful for investors, if you figure out hot trends and then conduct a market basket analysis, you might find some key insights. For example, if beer starts selling in higher quantities, investing in potato chip companies (because people eat potato chips when they drink beer) might turn out to be a profitable investment.
PESTLE Analysis
If you’re looking for a market analysis template, consider using some of the more popular options, such as a PESTLE analysis, which stands for Political, Economic, Social, Technological, Legal, Environmental”. This means that you will compare and contrast each of these individual elements.
Others
There are numerous other popular analysis templates, such as SWOT, BCG Matrix, STEEPLE, and many more. If you want to find the right analysis tool, you should start by figuring out what you want to know and why. Then you can find a template that matches your needs. Study these templates inside and out. By knowing them to the maximum extent, you can use them more effectively.
You can also hunt down a market analysis example. Many investing and consulting companies will provide examples because it helps them show off their skills and stuff. So if you’re looking for a market analysis example, hunt around a bit and check out companies like McKinsey and Boston Consulting Group to see if they are offering any free examples. Different types of analyses can provide different key insights. As an investor, your goal is to get an edge up on other investors, to find insights that no one else sees. By doing so, you can beat markets and build a successful investment strategy.
Follow
Leave a Reply