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. 009Why did you take a variant view on the multiple you applied to that company, relative to street expectations?ValuationHardsuperdayFTFranklin TempletonOil and Gas · San Mateo · 2024

   Say this

   Because the multiple should reflect the durability and the capital intensity of the earnings, and I think the market is applying a mid-cycle multiple to earnings that are not mid-cycle. Say what the street assumes, then why that assumption is wrong.

   Then walk it

   1. First, state the street's implied assumption in numbers. 'Consensus applies 6 times to a refiner on peak crack spreads, which implies they believe those spreads persist.'
   2. Then your disagreement and its basis. 'I apply 4.5 times because I think those spreads normalise within 18 months as capacity comes back, so I am valuing normalised rather than trailing earnings.'
   3. For a cyclical this is the whole game: the multiple and the earnings must be consistent. A low multiple on peak earnings is a value trap; a high multiple on trough earnings is often the correct entry.
   4. Support it with something observable: capacity additions, inventory levels, forward curve, historical spread ranges. The evidence has to be external to your own model.
   5. Then the discipline point: I would show the valuation across the cycle rather than a point estimate, and say what spread assumption is embedded in today's price. Reverse-engineering the market's assumption is the most persuasive thing in a research note.

   Where candidates lose it

   Justifying a multiple by peer comparison alone. That is circular. The multiple has to be defended by the economics, and for cyclicals specifically by where in the cycle the earnings sit.

   Expect next

   • What earnings are you applying that multiple to?
   • How do you normalise a cyclical?
   • What is priced in today?

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

2. 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.

3. 017How would you value a bank?ValuationHardtechnicalPerella Weinberg PartnersFinancial Institutions Group · New York · 2026Man GroupEquity Hedge · Boston · 2019

   Say this

   Price to tangible book against return on tangible equity, plus a dividend discount or residual income model. You do not use enterprise value or EBITDA, because for a bank debt is raw material and interest is revenue.

   Then walk it

   1. The core relationship: a bank should trade around book value if its return on equity equals its cost of equity, above book if it earns more, below if it earns less. The regression of price to book against ROTE across a peer group is the single most useful chart in the sector.
   2. Use tangible book, stripping goodwill and intangibles, because that is the capital actually supporting the balance sheet.
   3. For an intrinsic value, use a dividend discount model or residual income, since dividends are constrained by regulatory capital and that constraint is the real driver of distributable cash.
   4. The forecast drivers are net interest margin, loan growth, fee income, the cost-to-income ratio, and the provision charge. Provisions are where the cycle shows up and where forecasts go wrong.
   5. Capital is the binding constraint on everything. CET1 ratio against the regulatory requirement determines whether the bank can grow, buy back stock or must raise equity, so I would model capital explicitly rather than treating it as an output.
   6. And the thing that actually breaks bank valuations: credit losses are non-linear. A small deterioration in the macro can wipe out several years of earnings, which is why banks trade below book in a downturn regardless of reported profit.

   Where candidates lose it

   Applying EV/EBITDA or a standard unlevered DCF. It is meaningless for a bank and it is an instant fail in a financials interview. Lead with price to tangible book versus ROTE and the reason enterprise value does not apply.

   Expect next

   • Why can you not use enterprise value?
   • What happens to the valuation if rates fall 200 basis points?
   • How do you forecast provisions?

   Reported by candidates at Perella Weinberg Partners (Financial Institutions Group, New York, 2026); Man Group (Equity Hedge, Boston, 2019). Source: Wall Street Oasis.

4. 027How would you evaluate an LP stake in a fund, and how much would you pay for it?ValuationHardsuperdayBGBaupost GroupEquity Hedge · Boston · 2018

   Say this

   Start from reported NAV, then adjust it. You are buying the underlying assets plus the unfunded commitment and minus the fees, so the price is NAV adjusted for your own view of the marks, liquidity and remaining fee drag.

   Then walk it

   1. Reported NAV is the starting point, not the answer. Look through to the underlying positions and form your own view on the marks, especially anything illiquid or level three.
   2. Adjust for the fee drag on the remaining life: management fees on committed capital plus carry on future gains. That can be several percent of value in a fund with years left.
   3. For a closed-end structure, factor the unfunded commitment. You are buying an obligation to put in more money, and that has a cost and a risk.
   4. Then discount for illiquidity and for information asymmetry. The seller knows more than you, and there is a reason they are selling. Secondaries typically transact at a discount to NAV for exactly this reason, though quality assets can clear at or above.
   5. Then the vintage and the J-curve position. A fund three years in with assets marked at cost is a very different proposition from one seven years in with a clear path to exit.
   6. So my answer would be a percentage of NAV with the adjustments itemised, and I would say which adjustment I am least confident about.

   Where candidates lose it

   Answering 'NAV'. If it were NAV there would be no question. The expected content is the fee drag, the unfunded commitment, the illiquidity discount and adverse selection. Name the seller's information advantage explicitly.

   Expect next

   • Why is the seller selling?
   • How would you diligence the marks?
   • What discount to NAV would you want?

   Reported by candidates at Baupost Group (Equity Hedge, Boston, 2018). Source: Wall Street Oasis.

5. 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.

6. 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?
7. 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.

8. 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.

9. 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.

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.