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Equity Research Interview Questions

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Advantages of using EBITDA over enterprise value in the valuation process.

2 Answers

EBITDA is unrelated to enterprise value. EBITDA is earnings before interest, taxes, depreciation and amortization. It is a relatively useless indication of a company's real earning power according to warren buffett, charlie munger, ben graham and value investors et al. EV is market cap + debt - cash and cash equivalents. This looks like it was a quick question to see if the candidate is full of it : )

I think when he said "over", he was using it to signify "divided by, as in Enterprise Value/EBITDA. The advantage is that it allows you to compare firms of different sizes and capital structures, as EV is the whole pie and EBITDA flows to both debt and equity holders. A similar question I have gotten is: "What would you use as a numerator if your denominator were EBITDA: Enterprise Value or Equity Value?"

3. Compare and contrast ROA, ROE, and ROIC. Which one is most informative and why? Use an example to illustrate your position. Tricky since lots can be said on this matter.

1 Answer

Looking for adaptability to their trading style. Long/Short, Market Neutral, higher volume trading style.

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What qualities can you bring to the firm?

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What sector has performed the best in the past 20 years?

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Pick a sector to be in right now

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Please pitch me a stock.

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What are your investment recommendations?

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Where does net income fall on the balance sheet?

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