Equity Research Interview questions
On short notice I have an interview with an analyst and an associate on thursday for an associate position.
Can anyone give me a heads up on what will likely be asked? Will this be a fit interview or more technical based questions and if anyone can give an example as to what level of depth the technical questions will go into if so?
This is my first time applying for an equity research role so i am unfamiliar with the process.
Equity Research Types of Interview Questions
As with any other interview for firms you can expect to prepare a variety of questions ranging from behavioral to see how well you fit within the firm's culture, to technical question to gauge how experienced and connected you are with the markets. The best way to prepare for these is to learn common questions and to practice them as much as you can!
Fit and Behavioral Questions for ER Interview
These are probably the most standard interview questions to find out more of who you are and your work ethic. Some questions may include:
- Tell me more about yourself/resume
- Why this firm/equity research/position
- Explain a time where you had trouble, showed leadership, etc
User @esbanker", a private equity analyst, makes a great point regarding fit questions:
some key words that should guide your examples for fit questions in ER: analytical, detail oriented, excellent writing skills, strong verbal communication, at ease with financial modelling. some people tend to think that Equity Research Analysts are mainly 'bookish', but i'd argue that teamwork still plays an important role, especially during earnings season. arguably the most important fit question is why do you want to do equity research as opposed to something more "prestigious" (IB) or "exciting" (S&T).
Technical Questions for ER Interviews
There are countless different questions that could be asked for the technical aspect, but they all focus more on actual investing and how one would approach investing a specific company. While this is not an extensive list by any means, here are some of these questions you can expect to see:
- What do you think about X company?
- What is beta?
- Major valuation methodologies
- EBIT vs EDBITDA
- Market questions
- Pitch me a stock
Stock Pitch for ER Interviews
The stock pitch is arguably the most important aspect of an equity research interview. It's a good rule of thumb to keep roughly 2-4 stocks that you present a quality pitch for. You should be able to list a few of the valuations to back up your pitch as well as connecting your pitch to current market trends.
User @esbanker", a private equity analyst, again provides a sample stock pitch and it's a solid format to base your pitch off of:
Well, I've recently been following Copa Airlines, a Panamanian airline company, currently trading at $xx per share. Recently, the airline industry has been underperforming the markets for several reasons: compressed margins from the volatility in oil this year, increased competition from low-cost carriers, and overleverage by most airlines (think American or Air Canada).
While many airline companies are in desperate need of restructuring, Copa airlines has seen their revenues - now at $1.4 billion - grow at a robust 10% compounded over the last 5 years. Copa boasts EBITDA of approx. $350 MM, Net Income of around $240MM which translates to roughly 18%. Margins have remained stable over the last few years and are significantly greater than other airlines.
After running a basic DCF (5 year projections), Copa has an implied price per share of $xxx. In terms of comps, Copa is trading at an EV/EBITDAR of 7.7x which is slightly less than the industry median of 10.3 x, and a PE ratio of 12.9 x relative to an industry median of 14.1 x.
Copa has recently acquired Aero Colombia to gain significant exposure to the growing Colombian market (~xx% of market share), as well as provide quicker access to Brazilian airports. Air traffic in Panama is also expected to grow by xx% by 2014 due to infrastructure development and increased trade from the Panama canal expansion. Given Copa's strategic positioning in Latin America, its strong operating and financial performance of late, and its relatively cheap share price, I would strongly recommend to buy Copa Airlines.
(note, some of the numbers are out of date - this is from an early 2011 model)
If you have any other suggestions and recommendations for acing your equity research interview please comment below!
Check out another great discussion on equity research interviews.
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