Chartered Financial Analyst Level 2

Explanation:

Comparable company analysis is sensitive to market mispricing because it relies on current market prices and multiples of comparable companies. If the comparable companies themselves are mispriced by the market, the valuation derived from them will also be distorted.

Why not the others:

• Estimating fair takeover price (B): While comparable analysis can provide context, it doesn't directly estimate takeover prices, which typically require premium analysis
• Used more for acquisitions than spin-offs (C): Comparable analysis is equally applicable to both acquisitions and spin-offs, as both require relative valuation

Key limitation: The method assumes that comparable companies are fairly valued, which may not always be true in inefficient markets.