If companies in a public comps set have different fiscal year ends, what should be done?

When companies in a public comps set have different fiscal year ends, the best approach is to calendarize by matching their fiscal years. This means adjusting the financial data to align with a common time period, typically the calendar year. This is important for several reasons.

First, using different fiscal years can make it challenging to effectively compare financial performance and other metrics across companies, as they may be reporting on different timeframes. For instance, a company might have significantly fluctuating revenue or expenses in specific quarters that could distort comparisons if another company's fiscal year doesn't encompass the same period.

By calendarizing, you create a standardized basis for comparison, ensuring that each company’s performance is evaluated over the same timeframe. This helps in making a more accurate analysis of key metrics such as revenue growth, margins, and other operational indicators. It allows analysts to derive more meaningful insights when determining valuations or making investment decisions based on the comparative financial health of the companies.

In practice, calendarizing could involve estimating or prorating certain figures so they can be aligned with the chosen calendar year. This method enhances comparability and provides a clearer picture of performance across the set of companies.