Goal: project out 2 years of earnings, valuation
Resources: 2 years worth of 10qs and ks, transcripts, and slide decks.
Where do you begin? Ideally this is for Financials, cre, or fintech
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You should do at least one if not multi test runs in a similar format. The hardest part of these types of cash studies is time management - you need to get a sense of how to most efficiently use your time. It's pretty easy to spend too much time up front on things that don't matter only the scramble at the end - hence some trial runs to get a good sense of cadence to hone into what you can and cannot get through in that time frame. Big picture focus on needle movers and don't waste time on things that aren't overly impactful.
This is not financials / CRE/ FinTech specific, but generally how I've structured four hour case studies in the past.
Hour 1: Read all SEC filings, investor presentations, and sell side research (if provided) and take notes on the business and any other critical information that might jump out on you. Make sure you understand the basic revenue / cash flow drivers of the business and isolate any segments, KPIs, or other details within the notes you think are important when building your model / recommendation.
Hours 2 - 3: Build basic model from Revenue Drivers / KPIs -> Top-Line -> Adj. EBITDA -> Earnings (if relevant) -> Free Cash Flow and build in functionality to adjust key sensitivities to drive various case output scenarios. I've never found it necessary to build a fully functional three statement model in this sort of case. Most complexity was building a net working capital model for a situation where working capital changes was very relevant. Build a simple valuation model, usually a P / E or EV / EBITDA based one.
Hours 3 - 3.5: Think about what "pitch" you're going to make for your case and start to build it into your model keeping in mind the notes you've taken on the business. Compare your results to any guidance provided by management or Consensus estimates if you have them. Clean up any quirks in your model. Create any last minute exhibits you'd like to add such as sensitivity analyses on KPIs.
Hours 3.5 - 4.0: Stop working on the model and start drafting your write up on the situation with your recommendation, investment thesis, and valuation. You obviously won't have time to cover everything with the company you're given, so I think it's always a good idea to include a checklist of "next steps" you'd want to take if you continued working on the pitch.
Could you break down that first hour in more detail? Which document would you read first? Which part of that document do you care the most about etc. Importantly, what documents or sections can you skip?
Sure. So you want to come away with a high level understanding of what this business is, how it operates, and how the Company chooses to report its information via segments / KPIs. The best document for this is the 10-K, but I will actually flip through the investor presentation first to get some context. It is helpful to have at least a little understanding of what the Company is before diving into the 10-K which the presentation will provide. It will also inform me a little bit on things I should be on the lookout for - i.e., a retail business I want to makes sure I spot the reconciliation of store count and any store level / 4 wall economics they provide. It is good to isolate early on what type of business model this is - widget maker, subscription based, leasing, etc. So the business section in the 10-K will be the most useful, and then the notes are usually good for segment / KPI stuff. Everything else you can generally just skim over. The trick here is not wasting so much time reading all the filings. Once you feel like youve "got it" from a POV of how the company works, move on so you don't waste time.
If it's for a bank and I cover banks how should I approach it?
Idk I don't cover banks, you'd prob know better than I
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