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. 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.

2. 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.

3. 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?
4. 048What is a value trap and how do you avoid one?Investment philosophyIntermediatetechnicalAsset management

   Say this

   A stock that is statistically cheap and keeps getting cheaper because the business is deteriorating faster than the price. The multiple is low for a reason, and the reason is usually visible if you look at returns on capital rather than the P/E.

   Then walk it

   1. The mechanism: earnings fall faster than the price, so the multiple never actually contracts and the investor is permanently early.
   2. The warning signs: declining returns on invested capital, structurally falling market share, a terminal-demand story, and earnings quality deteriorating while reported profit holds up.
   3. The classic setups are companies facing technological substitution, businesses with a single customer or channel under pressure, and cyclicals where the market is pricing normalisation that is not coming.
   4. How to avoid it: insist that the cheapness has a catalyst and a mechanism for resolution. Cheap plus a reason for the gap to close is an investment; cheap alone is a hope.
   5. And test the earnings base before the multiple. A 6 times P/E on peak earnings is 15 times on normalised earnings. Most value traps in cyclicals are just this arithmetic error.
   6. The behavioural safeguard: write down in advance what you would need to see within 12 months. If you cannot name it, you are not investing in a discount, you are holding a declining asset.

   Where candidates lose it

   Defining it and stopping. The examinable content is the diagnostic, which is deteriorating returns on capital plus no catalyst, and the cyclical version where the earnings base is wrong rather than the multiple.

   Expect next

   • Give me an example you have seen.
   • How do you distinguish it from a genuinely mispriced stock?
   • What catalyst would you require?
5. 049How do you build a short thesis, and how is it different from a long?Stock pitchHardsuperdayBank of AmericaInvestment Banking · New York · 2023

   Say this

   A short needs a catalyst and a timeline in a way a long does not, because the payoff is capped, the loss is unlimited, and you pay to hold it. Valuation alone is never a short thesis.

   Then walk it

   1. The asymmetry: the most you make is 100 percent, the most you lose is unlimited, and the position grows against you as it moves the wrong way. That inverts the position sizing logic.
   2. Carry costs: you pay the borrow fee and you owe the dividend. A hard-to-borrow name can cost 20 percent a year, which means being right slowly is the same as being wrong.
   3. So the thesis must have a mechanism and a clock: an accounting problem that surfaces at a specific filing, a refinancing wall, a patent expiry, a competitor launch, guidance that cannot be met.
   4. The strongest short categories are structural decline the market is extrapolating, accounting and cash conversion problems, balance sheet stress, and promotional management with a history.
   5. 'It is expensive' is not a thesis. Expensive things stay expensive for years, and short squeezes happen precisely in the crowded expensive names.
   6. And check the crowding before you enter: days to cover, short interest as a percentage of float, and options positioning. A crowded short with a stretched balance sheet on the other side is how funds get carried out.

   Where candidates lose it

   Pitching a short on valuation with no catalyst. That is the single most common failure, and experienced investors will immediately ask what makes it happen and what the borrow costs. Have both answers.

   Expect next

   • What is the borrow cost?
   • How crowded is the short?
   • How would you size it differently from a long?

   Reported by candidates at Bank of America (Investment Banking, New York, 2023). Source: Wall Street Oasis.

6. 050What is the difference between accounting profit and economic profit?AccountingIntermediatetechnicalCredit research

   Say this

   Accounting profit subtracts explicit costs. Economic profit also subtracts the cost of the equity capital employed. A company can report strong net income and still be destroying value if it earns less than shareholders' required return.

   Then walk it

   1. Economic profit equals NOPAT less a capital charge, where the charge is invested capital times WACC. Equivalently, invested capital times the spread between ROIC and WACC.
   2. The insight: equity is not free, but accounting treats it as though it is. Interest appears on the income statement; the cost of equity never does.
   3. So a business earning 6 percent on capital with a 9 percent cost of capital reports a profit while shredding value every year. That is extremely common in capital-intensive industries.
   4. It reframes growth: growth is only good when the spread is positive. For a negative-spread business, growing the capital base accelerates the destruction, and the value-maximising action is to shrink and return cash.
   5. It is the basis of EVA-style frameworks and of how thoughtful investors judge capital allocation, which is often the single biggest determinant of long-run returns.
   6. The practical use in research: plot ROIC minus WACC against the valuation multiple across a sector. The companies trading at a premium with a negative spread are where the mispricing usually sits.

   Where candidates lose it

   Defining the terms without drawing the conclusion about growth. The payoff of this concept is that growth destroys value when the spread is negative, and that is what makes it worth asking about.

   Expect next

   • So should that company grow?
   • How does this affect how you judge management?
   • Where does this show up in a valuation?
7. 051How do you assess management quality?Company analysisHardtechnicalMorningstarEquity Research · Chicago · 2023

   Say this

   By their record on capital allocation, not by how impressive they are in a meeting. Look at what they bought, what they returned, what they promised and what they delivered.

   Then walk it

   1. Capital allocation first: the returns on the acquisitions they made, whether buybacks were executed at low or high valuations, and whether reinvestment earned above the cost of capital.
   2. Promises versus delivery: pull guidance from three and five years ago and compare it to what happened. Chronic over-promising is the most reliable negative signal available.
   3. Incentive structure: what are they actually paid on? EPS targets encourage buybacks and acquisitions regardless of value; ROIC or total shareholder return targets align better. Read the remuneration section, because it predicts behaviour.
   4. Insider ownership and trading: meaningful personal ownership relative to their salary matters far more than the raw percentage.
   5. Communication quality: do they disclose the metrics that would reveal a problem, or only the flattering ones? Did the definition of the adjusted metric change when it stopped working? Changing the goalposts is a red flag.
   6. And behaviour in the bad period. Anyone looks good in an upcycle. How they behaved in the last downturn, whether they cut the right things and whether they were honest about it, is the real test.

   Where candidates lose it

   Relying on impressions from management meetings. Good management teams are selected for being persuasive, so charisma is an unreliable signal. The evidence is in the capital allocation record and the remuneration policy.

   Expect next

   • What is the best evidence of poor capital allocation?
   • How do incentives change behaviour?
   • What would you ask a CEO in a one-on-one?

   Reported by candidates at Morningstar (Equity Research, Chicago, 2023). Source: Wall Street Oasis.

8. 054What is the difference between EV/EBITDA and P/E, and when do you use each?ValuationCorephone / first roundWBWilliam BlairInvestment Banking · Chicago · 2026

   Say this

   EV/EBITDA values the whole enterprise before capital structure and depreciation policy, so it is for comparing operating businesses. P/E values the equity after everything, so it reflects leverage, tax and accounting choices.

   Then walk it

   1. Use EV/EBITDA when companies differ in leverage, tax position or depreciation policy, and in any M&A context, because a buyer takes the enterprise and refinances it.
   2. Use P/E when comparing similar companies in the same jurisdiction with similar capital structures, and when talking to equity investors who think in earnings per share.
   3. P/E's weaknesses: it is distorted by leverage, by one-offs, by tax rate changes and by share buybacks, and it is meaningless with negative earnings.
   4. EV/EBITDA's weakness: it ignores capital intensity entirely, so two companies with identical EBITDA but very different CapEx look identical when they are not.
   5. For financials you use neither in the usual form. Price to tangible book against ROTE, because enterprise value has no meaning for a bank.
   6. In practice a research note shows both plus a cash-flow-based measure like free cash flow yield, and the interesting analysis is usually where the two multiples disagree, because that gap is telling you something about leverage or capital intensity.

   Where candidates lose it

   Reciting definitions without saying when each breaks. And forgetting that for banks and insurers both are inappropriate, which is the follow-up that catches people.

   Expect next

   • Why can you not use EV/EBITDA for a bank?
   • What if the two multiples disagree?
   • What does free cash flow yield add?

   Reported by candidates at William Blair (Investment Banking, Chicago, 2026). Source: Wall Street Oasis.

9. 055How would you think about a company's capital allocation priorities?Company analysisIntermediatetechnicalCenterview PartnersInvestment Banking · Menlo Park · 2026S&P GlobalDebt Capital Markets · Chicago · 2022

   Say this

   Rank the uses by return. Reinvest in the business if it earns above the cost of capital, then acquisitions if they clear the same bar with a margin for integration risk, then buybacks if the stock is below intrinsic value, then dividends.

   Then walk it

   1. Organic reinvestment should come first when incremental returns are high, because it is the lowest-risk way to compound and requires no premium.
   2. Acquisitions next, but with a higher bar, because you pay a control premium and take integration risk. A company that habitually acquires at multiples above its own is usually transferring value to sellers.
   3. Buybacks only when the shares trade below intrinsic value. A buyback at a high price destroys value even though it raises EPS, which is why the EPS-driven buyback is such a common error.
   4. Dividends when the business generates more cash than it can reinvest well. A dividend is a signal that management is disciplined, and it is sticky, so it is a commitment.
   5. Debt paydown belongs in the ranking too, and rises to the top when leverage threatens flexibility or the rating.
   6. The signal to read: a company issuing stock at low valuations and buying back at high ones has management that does not think about value. That pattern, visible in the cash flow statement over ten years, tells you more than any strategy presentation.

   Where candidates lose it

   Treating buybacks as automatically shareholder-friendly. Price matters, and the discipline test is whether they bought back more when the stock was cheap or when the cash happened to be there.

   Expect next

   • When is a buyback value-destructive?
   • What are the different ways to use excess cash?
   • How do you judge their acquisition record?

   Reported by candidates at Centerview Partners (Investment Banking, Menlo Park, 2026); S&P Global (Debt Capital Markets, Chicago, 2022). Source: Wall Street Oasis.

10. 056What is free cash flow yield and why do some investors prefer it?ValuationIntermediatetechnicalAsset management

    Say this

    Free cash flow divided by market capitalisation, or unlevered free cash flow over enterprise value. Investors prefer it because cash is harder to manipulate than earnings and because it is directly comparable to a bond yield.

    Then walk it

    1. It bypasses most accounting judgement. Depreciation policy, capitalisation choices and provisioning all affect earnings and none of them affect cash.
    2. It is comparable across sectors and against other assets. A 7 percent free cash flow yield against a 4 percent bond yield is a meaningful comparison in a way that a P/E is not.
    3. It captures capital intensity, which EV/EBITDA cannot. Two companies with identical EBITDA and different CapEx have very different free cash flow yields, and the difference is real.
    4. The definitional traps: does free cash flow include or exclude stock-based compensation, acquisitions, and working capital swings? Companies present the flattering version, so build it yourself from the cash flow statement.
    5. The main weakness: it penalises companies investing heavily for growth. A business spending on a new facility looks expensive on free cash flow yield and may be the better investment. So it suits mature businesses and misleads on growth ones.
    6. Use normalised CapEx rather than one year's, because a single heavy investment year distorts it badly.

    Where candidates lose it

    Not separating maintenance from growth capital expenditure. A growth company's low free cash flow yield is not evidence it is expensive, and treating it that way is how people miss compounders.

    Expect next

    • How do you split maintenance from growth CapEx?
    • Should stock-based compensation be subtracted?
    • When does this metric mislead?

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.