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.
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