Easy companies to practice modeling with?
Hey guys, so I've been trying to get better at modeling and I want to start practicing building DCF/lbo models from scratch. I'll be applying to FT IBD next year but have had zero internships in the field so I would like to have some experience under my belt to compete with those who have had internships.
I'm wondering if anyone has some suggestions for some public companies that would be the easiest to begin practicing with.
Ideally I'd like to build a list to start working through so I can make some models that actually balance... All the ones I have tried to do thus far I have never been able to balance out. As far as formal training in modeling, all I have had is a semester long valuation class where we each did DCF and comps analysis.
Thanks guys!
Start with companies that have business models you can intuitively understand and aren't specialised - for example consumer companies like Macy's or Target etc would be good places to start.
What are you doing this summer? If by applying for FT IBD next year you mean you'll be applying next year and hoping to start the following year, your time modelling would nearly certainly be better spent trying to get a relevant internship - although no relevant experience + having modelling skills is far better than neither, somewhat relevant experience + no real modelling skills will win out in recruiting for sure.
Yeah, I would actually love to do an IBD internship this summer. Due to restraints through a school program I am committed to an internship in energy/commodity trading. The upside is that I will most likely be in energy banking so the internship will help me stand out by knowing the energy sector well (or so I hope).
Thanks for the advice!
Restaurant and retail businesses are both pretty simple and intuitive to model. So if there is one you are familiar with and interested in that'd be a great choice.
However getting the model to balance is a different issue. Balancing is a formulaic issue with your model. Restaurants/retail are simpler to model because the drivers of revenue / profitability and capex are easy to forecast, but that isn't going to solve a formula issue.
If you want PM me and I can take a look at what you've built so far and hopefully figure out why you are having trouble with the balance sheet.
But aside from that I agree w/ above poster that I'm confused why you are not currently hunting for an internship this summer.
Thanks for the offer, I'll pm you when I get 10 banannas.. haha.
Thanks for the offer, I'll pm you when I get 10 banannas.. haha.
Hey, is it ok if i send you a model i'm having problem with. its Apple
I can take a quick look at it if you want
+1 sb to get you closer to messaging him. Should hit 10 with 2 other comments
+1 more SB so you can PM faster. Fair enough, I mistakenly assumed you wouldn't be interning at all. Not sure what your interest level/financial situation is like but as internships are such an integral part of the process and it's much harder to get a job FT if I were you I'd seriously consider extending my degree by a year to be able to do a SA if FT doesn't work out.
Practice Valuating Companies (Originally Posted: 05/24/2007)
I was wondering if any of the current bankers out there have any suggestions how to adequately prepare for valuating companies. Are there any articles (links/titles), textbooks, workbooks, etc. that have to your experiences proved worthwhile and more so, applicable? I have done a substantial amount of research into trying to uncover some of the best ways, and most valuation methods are people's subjective opinion of DCF Analysis (usually a professor at Wharton). I am currently working for a MM IB with connections to a BB and would like to be prepared for any valuations they throw my way as well as my possible eventual transfer to the connected BB. This is mainly concerning DCF but any public comparables or precedent transactions would be an interesting read as well.
Thanks
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Investment Valuation Tools and Techniques for Determining the Value of Any Asset by Aswath Damodaran.
Kiwili24: Today was my third day. I am trying to be prepared for the material before it comes. This IB deals mainly with privately held companies, and thus, primarily uses precedent transactions and comps. The information I am trying to receive on DCF is for my career down the road.
iwantafootballteam: Great suggestion. I just picked the book up on ebay. 900+ pages ought to be able to finally teach my DCF sufficiently.
Dude, I still dont get it. Ive done valuation for private companies plenty of times and that is exactly when you use the dcf more than anything else. it sounds to me like you either need to wait to get a nice dcf thrown your way by your staffer or you need to ask for some more dcf work. you cant really learn this stuff until youve done it there and then. gluck.
"living the dream 24/7 on http://theallnighter.blogspot.com"
Does anyone else have any reccommendations, particularly links to online articles or at least cheaper than a text book?
Everything you will ever need: http://pages.stern.nyu.edu/~adamodar/
Everything you will ever need: http://pages.stern.nyu.edu/~adamodar/
Great link PoolSideBanker. Thanks for the input!
there is a book called "Discounted Cash Flow" by Andreas Loeffler look it up on Amazon
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The book is by Aswath Damodaran. Like I mentioned before, knowning the basics of DCF, the formulas involved etc. is one thing. Being able to actually do a DCF in an interview is entirely different. Keep in mind, if you are interviewing for an analyst position, a common question might be, "Walk me through a DCF analysis" - asking on a theory level. However, if you are an MBA student, interviewing for an Associate position, they might actually give you data and ask you to compute the value of the company, at least from what I have heard from people in the industry. I have already told you that it was MM and not boutique and I am aware of the differences. Thanks to everyone that contributed some sources for information.
There is a relatively new abriged version, called "Damordoan on valuation: Security Analysis for corporate finance" that's 600 pages and has some new chapters in the end for special situations.
If I remember correctly, this volume removed contingent claim analysis from Dr. D's original volume and adds on a 300-page section that deals with loose ends in valutation. So it has only sections on DCF and relative valuation rather than all three.
I have both books. Both are quite excellent. The problem however, is to discipline yourself to memorize most of the concepts and vast quantity of formulas .
do an actual dcf IN an interview by hand? you know how long that shit would take if they gave you the statements and you had to go through 5-10+ years of calculations
I totally disagree. I work for a MM PE shop and I do valuations for private companies every day. Only reason I do a DCF is because it's included in my model template. NOBODY looks at DCF for private companies. Too easy to manipulate. EVERYBODY uses multiples (90% of the time using EBITDA or EBITDA less maintenance capex).
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