Equity Research interview preparation

Questions

100

Traced to a firm

72

Firms

45

Updated

September 2026

Asked at

All firmsMorningstar12Man Group6Balyasny Asset Management5BLBlackRock5FTFranklin Templeton5MSCI5Jefferies4CSCredit Suisse3Fidelity Investments3Moody's3Perella Weinberg Partners3Point723S&P Global3The Vanguard Group3WMWellington Management3Advent International2Apollo Global Management2Bank of America2Carlyle Group2DED.E. Shaw2Houlihan Lokey2HSBC2Piper Sandler2Sequoia Capital2SSState Street2Viking Global Investors2WBWilliam Blair2ACAQR Capital Management1BGBaupost Group1BMBNY Mellon1Centerview Partners1Coatue Management1Goldman Sachs1GSGuggenheim Securities1HWHarris Williams1Insight Partners1Invesco1Mizuho1Moelis & Company1MSMorgan Stanley1PIMCO1SCSchroders1Scotiabank1T. Rowe Price1TSTruist Securities1

Topic

All topicsResearch process9Stock pitch6Company analysis8Investment philosophy5Valuation14Modelling2Portfolio and risk8Macro8Sector knowledge2Accounting8Career and fit12Industry knowledge6Quantitative research1Sector: technology3Sector: consumer1Sector: healthcare1Sector: energy1Sector: financials2Sector: industrials1Case and estimation2

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitBrainteaserMarket view

1. 002What moves a stock?Research processIntermediatetechnicalBalyasny Asset ManagementEquity Hedge · Chicago · 2021

   Say this

   Changes in expectations, not the level of results. A stock moves when the market revises its forecast of future earnings, or revises the multiple it will pay for them. Everything else is noise around those two.

   Then walk it

   1. Price equals earnings times multiple. So there are exactly two levers, and every catalyst works through one of them.
   2. Earnings revisions are the bigger driver over any meaningful horizon. That is why the sell-side obsesses over guidance and why a beat with a cut to guidance sells off.
   3. Multiple changes come from the rate environment, from perceived risk, and from a change in the durability of growth. A company that convinces the market its growth is recurring rather than cyclical gets re-rated without changing a single forecast.
   4. In the short run, positioning and flows matter enormously. A crowded long with everyone already in it can fall on good news because there is nobody left to buy.
   5. So the practical question for a research analyst is never 'are results good' but 'are results better than what is discounted'. That is why the expectations framework is the job.

   Where candidates lose it

   Answering 'earnings' and stopping. That misses the multiple entirely, and it misses the central insight that it is the delta versus expectations that matters, not the absolute result.

   Expect next

   • How do you think about valuation drivers?
   • Why would a stock fall on a beat?
   • How do you measure what is priced in?

   Reported by candidates at Balyasny Asset Management (Equity Hedge, Chicago, 2021). Source: Wall Street Oasis.

2. 012What is the yield curve, what does it mean when it inverts, and why do people treat that as a recession indicator?MacroIntermediatetechnicalSSState StreetEquity Research · Boston · 2020

   Say this

   It plots government bond yields against maturity. Normally it slopes upward because investors demand more for lending longer. An inversion means short rates exceed long rates, which says the market expects the central bank to be cutting in future.

   Then walk it

   1. The normal upward slope comes from term premium and from expected growth and inflation.
   2. An inversion means the market expects policy rates to be lower in two years than today. Rates get cut when growth is weak, so an inversion is a forecast of weakness rather than a cause of it.
   3. The track record is why people watch it: in the US, a sustained 2s10s or 3m10y inversion has preceded every recession since the 1960s, usually by 12 to 18 months.
   4. There is also a causal channel, not just a signal. Banks borrow short and lend long, so an inverted curve compresses net interest margin and reduces the incentive to extend credit. Tighter credit slows the economy.
   5. The honest caveats: it has produced false positives, the lead time is long and variable, and quantitative easing distorted the term premium enough that the signal may be weaker than history suggests. An analyst who names that is more credible than one who treats it as a law.

   Where candidates lose it

   Describing the shape without explaining the mechanism, or treating the indicator as infallible. Both the expectations channel and the bank lending channel should appear, along with at least one reason to doubt it.

   Expect next

   • Which part of the curve do you watch?
   • How does an inversion affect bank earnings?
   • What is happening to the curve right now?

   Reported by candidates at State Street (Equity Research, Boston, 2020). Source: Wall Street Oasis.

3. 016Walk me through a DCF, and tell me when it is the wrong tool for a research analyst.ValuationIntermediatetechnicalJefferiesEquity Research · New York · 2026MorningstarEquity Research · Chicago · 2023

   Say this

   Forecast unlevered free cash flow, discount at WACC, add a terminal value, then bridge to equity value per share. It is the wrong tool when the terminal value dominates so completely that the answer is just your assumption restated.

   Then walk it

   1. The mechanics are the same as on the banking side: EBIT taxed, plus D&A, less CapEx, less working capital change, discounted at WACC, plus terminal value, less net debt, divided by diluted shares.
   2. Where research differs is the use. A sell-side target price is usually set on a multiple, with the DCF as a cross-check and a way to demonstrate what the market is implying.
   3. The most valuable version is the reverse DCF: hold the current price constant and solve for the growth and margin the market must be assuming. That turns valuation into a testable statement about expectations.
   4. It is the wrong tool for banks and insurers, where you use a dividend discount or residual income model because interest is revenue and free cash flow is not meaningful.
   5. It is also weak for early-stage or deeply cyclical companies, where near-term cash flows are negative or unrepresentative and 90 percent of the value sits in the terminal assumption.
   6. So the honest framing: a DCF is most useful not for the number it produces but for making explicit what you have to believe.

   Where candidates lose it

   Delivering the banking answer verbatim. On the research side the expected addition is the reverse DCF and the awareness that DCFs are rarely the primary target-setting method. Say both.

   Expect next

   • How would you value a bank then?
   • What does the reverse DCF tell you about this stock?
   • What discount rate do you use and why?

   Reported by candidates at Jefferies (Equity Research, New York, 2026); Morningstar (Equity Research, Chicago, 2023). Source: Wall Street Oasis.

4. 018What is the effect on the three statements of selling an asset?AccountingIntermediatetechnicalJefferiesEquity Research · New York · 2026

   Say this

   Depends on the sale price versus book value. Sell an asset with a book value of $100 for $120: you book a $20 gain, taxed; cash rises by the proceeds less the tax; and the asset leaves the balance sheet at its book value.

   Then walk it

   1. Income statement: a $20 gain. At 25 percent tax, net income rises $15.
   2. Cash flow: start at net income plus $15, reverse out the $20 non-cash gain in operating, then show the full $120 proceeds in investing. Net cash movement is $115, which is the proceeds less $5 of tax.
   3. Balance sheet: cash up $115, asset down $100, retained earnings up $15. It balances.
   4. For a research analyst the follow-through matters more than the mechanics: the gain is non-recurring, so it must be stripped out of the earnings base before you apply a multiple.
   5. And you lose the asset's future earnings, so the forecast has to come down. A company that beats on a disposal gain while its operating business shrinks is exactly the kind of thing a research note should call out.

   Where candidates lose it

   Getting the mechanics right and ignoring the analytical point. On the research side, the expected addition is that the gain is non-recurring and that forward earnings fall with the disposed asset.

   Expect next

   • How would you adjust your earnings base for it?
   • What if they sold it below book value?
   • How do you treat a company that regularly books disposal gains?

   Reported by candidates at Jefferies (Equity Research, New York, 2026). Source: Wall Street Oasis.

5. 036How would you forecast revenue for a company you have never modelled before?ModellingIntermediatetechnicalHoulihan LokeyInvestment Banking · New York · 2026

   Say this

   Build it from drivers, never from a growth rate. Find the two physical quantities that multiply to revenue, price and volume in some form, then forecast each separately against something observable.

   Then walk it

   1. Decompose first. A retailer is stores times sales per store. An airline is available seat miles times load factor times yield. A software business is customers times average revenue per customer. A bank is loan balances times net interest margin.
   2. Forecast each driver against something external: industry capacity, population, disposable income, an installed base, a contract backlog. That makes the forecast falsifiable and lets you update it when the external data moves.
   3. Cross-check top-down. If your bottom-up build implies the company takes six points of market share in two years, you need a reason. Reconciling bottom-up to market size is the sanity check that catches most bad models.
   4. Separate organic from acquired growth. A company growing 15 percent of which 10 is bought is a completely different business from one growing 15 organically, and blending them hides that.
   5. Then sanity-check against history: is the implied growth faster than the company has ever achieved? If so, say why this time is different, or lower it.
   6. A flat growth-rate assumption is acceptable only in the terminal years, and even then you should say what it implies.

   Where candidates lose it

   Applying a growth percentage to last year's revenue. It cannot be argued with, cannot be updated by new data, and gives you no basis for a variant view. Driver-based building is the entire point.

   Expect next

   • What is the driver for the company we cover?
   • How do you reconcile bottom-up to market size?
   • Where does your forecast differ from consensus?

   Reported by candidates at Houlihan Lokey (Investment Banking, New York, 2026). Source: Wall Street Oasis.

6. 038What is the rule of forty, and what are its weaknesses?Sector: technologyIntermediatetechnicalTechnology coverageGrowth equity

   Say this

   Revenue growth plus profit margin should exceed 40. It says a software company can be forgiven for losing money if it is growing fast, or for growing slowly if it is profitable, but not both.

   Then walk it

   1. The logic is a trade-off: spending on growth suppresses margin, so the combined figure measures whether that spend is productive.
   2. The first weakness is the margin definition. Free cash flow margin, operating margin and EBITDA margin give very different scores for the same company, and firms naturally quote the flattering one.
   3. The second is that it treats a growth point and a margin point as equivalent. They are not: for a long-duration asset, a point of durable growth is worth far more than a point of margin, because it compounds.
   4. The third is that it ignores the quality of the growth. Growth bought through acquisitions, or through discounting that damages net retention, scores the same as organic growth from pricing.
   5. And it says nothing about durability. A company at 60 today that decelerates sharply next year is worth less than a steady 42.
   6. So I would use it as a screen to compare companies quickly, never as a valuation input. The valuation question is always durability, and the rule of forty is silent on it.

   Where candidates lose it

   Quoting the heuristic without a critique. Anyone can state it. Naming the margin-definition problem and the growth-versus-margin asymmetry is what shows you have used it rather than read it.

   Expect next

   • Which margin would you use?
   • Would you rather have 20 percent growth at 20 percent margin, or 40 percent growth at breakeven?
   • How do you assess durability of growth?
7. 043Why can a stock fall on an earnings beat?Research processIntermediatetechnicalLong-short funds

   Say this

   Because the reported number is not what was priced. The market trades on the buy-side whisper and on forward guidance, so a company can beat published consensus and still disappoint on both.

   Then walk it

   1. Published consensus lags. The real bar is the buy-side expectation, which is usually higher into a strong quarter and is not in any database.
   2. Guidance matters more than the quarter. A beat paired with unchanged full-year guidance implies a cut to the rest of the year, and the market does that arithmetic immediately.
   3. Quality of the beat: driven by a lower tax rate, a one-off gain, or a buyback reducing share count is very different from a beat on volume and price. The market discounts low-quality beats.
   4. Forward indicators can contradict the headline: billings, backlog, bookings, orders. A revenue beat with deteriorating bookings is a sell.
   5. Positioning: if everyone already owns it into the print, there is no marginal buyer. A crowded long needs a large beat just to hold its level.
   6. So the framework for a research analyst is always the expectations gap, and the most useful pre-results work is establishing where the buy-side bar actually sits, not what the screen says consensus is.

   Where candidates lose it

   Treating published consensus as the bar. The gap between published consensus and the buy-side whisper is exactly what this question is about, and naming it is the mark of someone who has watched results days.

   Expect next

   • How do you find out where the buy-side bar is?
   • What is a low quality beat?
   • How do you position into a print?
8. 045How would you value a company with no earnings?ValuationIntermediatetechnicalPiper SandlerInvestment Banking · New York · 2026Sequoia CapitalVenture Capital · San Francisco · 2021

   Say this

   Move up the income statement until you reach a line that is meaningful, then value that. Revenue multiples, gross profit multiples, or a forward-year earnings estimate discounted back to today.

   Then walk it

   1. First ask why there are no earnings. A company spending heavily on growth is completely different from one with a broken cost structure, and only the first deserves a growth valuation.
   2. For growth-stage losses: EV to revenue, or better, EV to gross profit, since gross profit strips out the differences in cost of revenue between a software company and a delivery company.
   3. Then normalise: model forward to the year the business reaches a steady-state margin, apply a mature multiple to that year's earnings, and discount back. This forces you to state when profitability arrives and what it looks like.
   4. For asset-heavy or distressed cases, value the assets instead: net asset value, replacement cost, or liquidation value.
   5. For very early stage, the market approach dominates: what did comparable companies raise at, and what did similar businesses exit for.
   6. The discipline that matters: any revenue multiple is an implicit bet on a future margin. Saying 'six times revenue' without saying what terminal margin justifies it is not a valuation.

   Where candidates lose it

   Reaching for a revenue multiple with no view on terminal margin. Also failing to distinguish a company choosing to lose money from one unable to make money. That distinction determines whether the question is valuation or restructuring.

   Expect next

   • What terminal margin justifies that multiple?
   • When do they reach profitability?
   • Why is it difficult to value a first-year firm?

   Reported by candidates at Piper Sandler (Investment Banking, New York, 2026); Sequoia Capital (Venture Capital, San Francisco, 2021). Source: Wall Street Oasis.

9. 046Why is it difficult to value a company in its first year?ValuationIntermediatetechnicalSequoia CapitalVenture Capital · San Francisco · 2021

   Say this

   There is no history to extrapolate, no stable unit economics, and the range of outcomes is enormous. Almost all of the value sits in a terminal state you are guessing at, so any point estimate is false precision.

   Then walk it

   1. No track record means no base rate for your own forecast. You cannot test whether management hits plan because there is no plan history.
   2. Unit economics are unstable. Customer acquisition cost and retention in the first cohorts are unrepresentative, usually because early customers are enthusiasts and the cost of reaching them was low.
   3. The outcome distribution is not normal, it is power-law. Most early companies are worth close to zero and a few are worth enormous amounts, so an expected value calculation is dominated by a tail you cannot estimate.
   4. A DCF is therefore meaningless: 100 percent of the value is terminal, and small changes in assumption swing the answer by orders of magnitude.
   5. What you use instead: the market approach, meaning what comparable rounds priced at; scenario analysis with explicit probabilities; and milestone-based valuation where each funding round buys information rather than value.
   6. And the honest venture framing: you are not valuing the company, you are pricing an option on a team and a market. The diligence weight sits on the founders and the market size, not on the model.

   Where candidates lose it

   Trying to make a DCF work. The expected answer names the power-law distribution and the shift from valuation to option pricing. Saying 'you value the team and the market' is the venture-native response.

   Expect next

   • So what do you actually diligence?
   • How do you size a market for an early-stage company?
   • How does a power law change how you build a portfolio?

   Reported by candidates at Sequoia Capital (Venture Capital, San Francisco, 2021). Source: Wall Street Oasis.

10. 047What does return on invested capital tell you, and how do you calculate it?Company analysisIntermediatetechnicalLong-only asset management

    Say this

    It measures how much operating profit the business generates per dollar of capital employed. Compared against the cost of capital, it tells you whether growth creates or destroys value. NOPAT divided by invested capital.

    Then walk it

    1. NOPAT is EBIT times one minus the tax rate. Invested capital is debt plus equity less cash, or equivalently net working capital plus net fixed assets plus acquired intangibles.
    2. The comparison that matters is ROIC against WACC. Above it, every dollar reinvested creates value. Below it, growth actively destroys value, which is why some growing companies should shrink.
    3. Decompose it like DuPont: ROIC is NOPAT margin times capital turnover. That tells you whether the return comes from pricing power or from asset efficiency, which are different business models with different vulnerabilities.
    4. Look at incremental ROIC, not just the average. What did the last three years of capital spending earn? A high average with a low incremental return means the good business is mature and the new spending is not working.
    5. The practical adjustments: capitalise operating leases, consider capitalising R&D for a research-heavy company, and decide how to treat goodwill. Including goodwill measures the return to shareholders including what was paid for acquisitions; excluding it measures operating quality.
    6. And be consistent across the comp set, because the adjustments swing the number enough to change the ranking.

    Where candidates lose it

    Reciting the formula without the ROIC-versus-WACC comparison. That comparison is the entire analytical content, and the incremental version is what distinguishes a serious answer.

    Expect next

    • What is the incremental ROIC?
    • Should a company earning below its cost of capital keep growing?
    • How do you treat goodwill?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.