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. 041How would you analyse an energy or commodity producer?Sector: energyHardtechnicalFTFranklin TempletonOil and Gas · San Mateo · 2024Perella Weinberg PartnersInvestment Banking · Houston · 2025

   Say this

   Position on the cost curve first, then reserves and production, then the balance sheet. The commodity price is the same for everyone, so the only company-specific variables are cost, volume and leverage.

   Then walk it

   1. Cost position is everything. A producer in the bottom quartile of the cost curve survives the trough and buys assets cheaply; a high-cost producer is a leveraged bet on the price.
   2. Reserves and reserve life: how long can they produce at current rates, what is the finding and development cost per barrel, and what is the decline rate on existing wells. Shale declines fast, so maintenance capital expenditure is enormous relative to conventional.
   3. Never value it on a spot price. Use a normalised or strip-based deck and show sensitivity across a price range. A low P/E on peak prices is the classic cyclical value trap.
   4. Balance sheet and hedging: leverage against trough cash flow, not current cash flow, and what percentage of next year's production is already hedged and at what price.
   5. Then capital discipline, which has become the sector's main equity story: are they returning cash or reinvesting into growth at the top of the cycle? The market now pays a premium for discipline.
   6. And the long-run structural question on terminal value: what do you assume about demand in twenty years? That assumption, not this year's earnings, is what most energy disagreements are actually about.

   Where candidates lose it

   Valuing on trailing earnings at current prices. Cyclicals invert the normal multiple logic: high multiples at the trough and low multiples at the peak are the correct pattern, not an anomaly.

   Expect next

   • What price deck would you use?
   • How do you normalise a cyclical?
   • How does hedging change your view?

   Reported by candidates at Franklin Templeton (Oil and Gas, San Mateo, 2024); Perella Weinberg Partners (Investment Banking, Houston, 2025). Source: Wall Street Oasis.

2. 042How do you normalise earnings for a cyclical company?ValuationHardtechnicalFTFranklin TempletonOil and Gas · San Mateo · 2024

   Say this

   Estimate what the business earns through an average cycle, not at either extreme. Take mid-cycle volumes and mid-cycle margins, adjusted for any structural change since the last cycle, and value that.

   Then walk it

   1. Method one: average the margin over a full cycle, usually seven to ten years, and apply it to current revenue. Simple and defensible.
   2. Method two: estimate mid-cycle volume and mid-cycle price separately, then rebuild the income statement. More work, but it lets you adjust each independently.
   3. Method three: normalise on the balance sheet instead, using return on invested capital through the cycle applied to today's capital base. Useful when volumes have changed structurally.
   4. The critical adjustment: has anything structural changed since the last cycle? Capacity closures, consolidation, a new cost position, or demand substitution mean history is not a clean guide. This is where the analysis is.
   5. Then apply a mid-cycle multiple to the normalised figure. The common error is applying a peak multiple to normalised earnings, or a normalised multiple to peak earnings; the two must be consistent.
   6. And show the earnings range rather than a point. For cyclicals the honest output is a value at trough, mid and peak, with a probability view on where in the cycle we are.

   Where candidates lose it

   Normalising the earnings but not the multiple, or ignoring structural change and treating the last cycle's average as destiny. Consistency between the earnings base and the multiple is the whole discipline.

   Expect next

   • How do you know where in the cycle you are?
   • What has structurally changed in that industry?
   • Why do cyclicals look cheapest at the top?

   Reported by candidates at Franklin Templeton (Oil and Gas, San Mateo, 2024). Source: Wall Street Oasis.

3. 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?
4. 044What is a reverse DCF and why would you use one?ValuationHardtechnicalLong-only asset management

   Say this

   You hold the market price fixed and solve for the assumptions it implies, instead of producing your own value. It converts valuation from a number into a testable statement about what the market believes.

   Then walk it

   1. Mechanically: set the DCF output equal to the current market capitalisation, then solve for the revenue growth or margin that makes it balance, holding everything else at reasonable levels.
   2. The output is a sentence like: at this price the market is assuming 12 percent revenue growth for a decade and a 25 percent terminal margin.
   3. Then you can make a judgement that is actually falsifiable. Has any company in this industry sustained 12 percent for a decade? How many did, historically? That turns an opinion into a base rate question.
   4. It also removes the main criticism of a forward DCF, which is that you can produce any number you want by choosing assumptions. Here the market chose them; you are only judging them.
   5. It is especially useful for expensive growth stocks, where a conventional DCF is unpersuasive to anyone who does not already share your assumptions.
   6. The limitation: it still depends on your discount rate and terminal assumption, so it constrains the problem rather than solving it. But 'the price implies something only three companies in history have achieved' is a far stronger argument than 'my model says it is worth less'.

   Where candidates lose it

   Describing it as just a DCF run backwards without explaining why it is more persuasive. The point is rhetorical as much as analytical: it shifts the burden of proof onto the market's assumptions.

   Expect next

   • What does the reverse DCF say about a stock you follow?
   • How many companies sustain that growth rate historically?
   • What are its limitations?
5. 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.

6. 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.

7. 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?
8. 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?
9. 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.

10. 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?

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.