3. Industry Classification Systems
b. compare methods by which companies can be grouped, current industry classification systems, and classify a company, given a description of its activities and the classification system;
c. explain the factors that affect the sensitivity of a company to the business cycle and the uses and limitations of industry and company descriptors such as "growth," "defensive," and "cyclical";
d. explain how a company's industry classification can be used to identify a potential "peer group" for equity valuation;
What are the three commercial industry classification systems?
1. The Global Industry Classification Standard (GICS)
2. The Russell Global Sectors classification system
3. The Industry Classification Benchmark (ICB)
What is Peer group analysis?
Peer group analysis is the practice of comparing a firm's results to those of similar firms.