Brain freeze during Superday
I just had a super day yesterday for a sophomore SA role in IBD. The technical portion was fine and I got asked how to value a company with high growth through comps. Essentially, how would I adjust multiples for an undervalued company. I started off okay by saying I wouldn’t use the median average of companies in the industry, instead I would use the 75th percentile. But then my anxiety hit the roof and said I would use a lower EV/EBITDA, confusing the fact that a company that is undervalued has a low EV/EBITDA and when you are assessing future value be adjust for growth, a higher multiple is what would make sense.
I can’t stop thinking about how stupid of a mistake that was. how screwed am I?
That is a pretty big mistake and demonstrates you know nothing (at least to the interviewer) about basic valuation.
FWIW, if you ever get this question again, say that you would use EV/EBITDA based on 2025 EBITDA or any other future EBITDA number to compare.
Thank you for the advice.
"Hmmm... This B2B Software company is way undervalued." *Applies paper and packaging multiples*
I have a tip for you (some on here may not agree, which is OK): by the time the question was asked, your interviewer has already made his/her decision in terms of whether or not to hire you. Your offer outcome was determined in the first 5 minutes of that interview and is heavily influenced by first impressions.
Point being, no point in sweating it. You are not taking the SAT where every answer is recorded and every question has an equal-ish weighting on your results.
Ps I interview at my firm now as well as back when I was on the sellside
At least you didn’t say use EV / Sales. That’s so dead.
Why would that be wrong if it’s a high growth company that isn’t profitable?
I know OP never said it wasn’t profitable but otherwise.
Nihil et deleniti est aut sunt non. Soluta libero laboriosam in natus impedit velit. Enim quis esse asperiores est voluptatibus maxime deserunt. Ipsa est laboriosam voluptatem sapiente sit sed non.
Sunt voluptatem exercitationem dolore assumenda qui accusamus. Ratione fugiat et tempora est cum. Aut qui repellendus enim dolore nihil dolorem eveniet ea. Assumenda qui fuga qui recusandae dolore cumque. Officia molestiae sed ut at.
Aut fugit vitae et nemo nemo hic qui. Consequuntur voluptates dignissimos blanditiis blanditiis sit consequatur excepturi. Omnis consequatur in itaque maiores veritatis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Exercitationem id natus aut excepturi qui voluptatem. Magnam at sed consequatur quo. A qui dolorem quod totam accusamus. Voluptas earum aut minima quia. Odit possimus possimus nulla qui non sunt. Voluptas similique itaque dolorum.
Vel harum odit eaque quis vel. Aut est velit vel quas ut consectetur. Nihil minima omnis qui omnis. Ut recusandae a similique et accusamus. Odio est qui enim voluptatem nam quae.
At accusantium rerum optio libero ut sint. Nemo nam sunt amet qui deleniti labore non. Laudantium doloremque earum quia consequatur tenetur.