You are handed ten possible comparables for a niche dental imaging software company. Choose the comp set, justify every inclusion and exclusion, and pick the multiple.

Use the two dental software and two medical imaging software firms, on EV to next-year revenue: a median of 7.25x, about Rs 1,414 crore. They share Pixora's subscription model, high gross margin and 24% to 32% growth. Keep horizontal SaaS and hospital software as reference points, and exclude the clinic chain, consumables, equipment and diversified group, whose economics differ. Choosing on the word 'dental' would give about Rs 907 crore instead.

How it makes money, how fast it grows, and how profitable each extra rupee of sales is. Comparable means the same economics, not the same customers. A dentist buys software, drills, gloves and treatment chairs, but the companies selling them have nothing in common except the dentist. Think of valuing a flat by comparing it with other flats in the same building, not with the furniture shop on the ground floor, even though both serve the same residents.

Sort them into three groups and say one sentence for each. The core set is the two dental practice software firms and the two medical imaging software firms: subscription revenue, gross margins in the high 70s, growth of 24% to 32% against Pixora's 30%. Dental software shares the customer and the sales motion; imaging software shares the product and the cloud storage costs. Together they bracket Pixora from both sides.

Two are reference points, shown but not averaged. Taskfold, the horizontal SaaS company, has similar margins but sells to every industry and grows 35%: a ceiling. Wardline, the hospital software vendor, sells to a slower, budget-bound customer and grows 12%: a floor for health software. Four are out. The clinic chain is a services business, the equipment maker sells hardware with lumpy orders, the consumables company sells products with a manufacturing margin, and the diversified health IT group's conglomerate discountThe lower valuation markets often give a group of unrelated businesses than the sum of its parts would suggest. and mix make its multiple uninformative.

Pixora is near break-even because it is spending on growth, so an EBITDA multiple would divide by a number close to zero. Use EV to next-year revenue, which compares companies at a similar stage on what they sell, and cross-check with EV to gross profit since margins are close. Next-year revenue is Rs 150 crore grown 30%, Rs 195 crore. The core median of 7.25x gives about Rs 1,414 crore, and the range of the four, 6.8x to 8.4x, gives Rs 1,326 crore to Rs 1,638 crore.

Close with the limit. Four comparables is a small set, and any of them could be mispriced on a given day; say you would check that the medians hold on two dates and that none of the four is distorted by a pending deal. The choice of companies moved the answer by more than 50%, which is why interviewers ask for the reasoning, not the number.