ER Interview Coming Up? Know the Answers to These 3 Questions.
So after a great deal of networking and searching on job boards, you have an opportunity to interview for an equity research position. Now you may be asking how you can prepare for your upcoming interview. Here are three questions that I have been asked in almost all of my ER interviews:
- Do you have a favorite company right now? You should be prepared to pitch a stock to your interviewer. Know the what industry the company is in and its competitors.
- Why does this company make for a better investment than others in its industry? The interviewer may not specifically ask you this, but he most likely wants to see if you have solid reasoning behind your choice of stock. You should mention fundamental ratios (P/E, EV/EBITDA, margin, etc) that you believe set it apart from its competitors. Back up your investment idea with sound economic reasoning. Why is your company in a better position to take advantage of the current economic trends?
- Is this upside priced into the stock already? This is a difficult question to answer unless you have come to the interview prepared with a valuation for your favorite company. Does your valuation show that market has this stock under-priced?
Having well-prepared answers to these questions shows that you have a true interest in the industry, and that you have taken steps to further your interest. Good luck.
I would add: how financial statements are connected?
I agree. You should definitely know how the financial statements are connected for an ER interview. But in my experience, I have been more often tested on this during IB interviews.
and maybe a least favorite stock (i.e. a possible short)
Definitely know the connection between 3 financial statements
Hi For valuation of the stock, what do I have to show them? I don't have time to do a DCF for it since my interview is coming up. Can I just look up on the internet?
Thanks!
If you really follow a position you should have a fairly good grasp of recent earnings/performance/qualitative factors/etc. and should have a good handle on relevant industry multiples. As an example, you could use relative valuation...If you know that a company reported full year trailing EPS of $2.50 and that the average trailing P/E multiple in the industry is 15 you can make a case that the stock should trade around $37.50. If the stock actually trades for $30 you could make a case that it is undervalued.
Another example, if you know that same company recently paid a dividend of $1.25 and growth is expected to be relatively stable around 4% and that the required return is 8% (based on capm), you could tell me that the stock was worth $1.25 / r - g = $31.25 and again make the case that the stock is overvalued as it only trades at $30.
This is obviously simplistic but its a good start.
Obtain ER report, dumb it down so it doesn't come off as blatantly copied
One question: Do I need to be able to actually talk about that without referring to a short summary page or small flash card? Or it is okay to prepare a short summary page before the interview and during the interview, I will refer to that to pitch the stock?
holy shit
lol
They asked me to prepare a 1 page pitch for a final round at a BB. So it might be wise to do that beforehand and be ready for any questions on it.
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