Citadel Modelling Exam Help
Does anyone have any insights or advice into the Citadel case study round (modelling test) and how to best prepare? I had some specific questions below but any and all advice would be appreciated. Thank you in advance!
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For revenue build and costs build - what is the best way to have a more thoughtful approach (especially on a quarterly basis) vs just assuming simple percentage revenue growth rate?
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Since I assume this model is going to be quarterly, is it okay to just have quarterly IS numbers rather and leave cash flow and balance sheet numbers on an annual basis?
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Is there going to be a need for a DCF or can we just use a simply P/E multiple based on comps?
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I have heard that they provide ks, some qs and earnings transcripts. What should I be looking for on these?
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Revenues: depending on the industry you need to segment out your revenues by channel, geography, any other segmentation. Need to break out growth into organic, FX related growth and M&a / scope related growth by quarter. You should understand the market growth, how does the growth comp against the previous year / quarter, are there expected one offs, where is demand driving the growth. You should also think about splitting organic growth into price and volume. Growth from prices drops through to profit. Growth from volume leads to operating leverage and margin expansion
Costs: for industries like retail you should have a solid understanding of gross margin and unit ecos and how is that margin evolving (has management guided to any headwinds / tailwinds?)
Opex: solid understanding of operating leverage, how much of the cost base is likely fixed and hence growth will ultimately led to margin expansion
Below the line: don’t ignore, sellside are sleepy on these lines and exceptionals, associates and JVs etc are important to have a view on
Cash flow: unpack working capital into a cash conversion cycle if possible, understand supplier retailer dynamic. Look at guidance on capex, split capex into growth and maintenance. Understand SBC and any other cash flow items and account for IFRS16
Valuation: do a quick DCF, come to a target price. Comps also okay (where is the growth and margin relative to comps, should it therefore trade at a discount or premium to the sector?) - most important is come up with a target price that defines your upside
This answer really looks like what an analyst does in its day-to-day work.
However, this will not fit with the 3-hour modelling test usual format IMO, too much detailed.
Yep I just put it all down for ease
With limited time it’s important to take shortcuts where appropriate.
When reading the presentations / transcripts in the first 30-45 mins of the case, first thing to do is understand the most important value drivers for the business / sector and spend more time having a view on those. Eg for retail LfL growth and margins move the dial, but in industrials volumes, price and inflation more important.
Are you allowed to use the internet during these modeling tests?
u have this test too？
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