MEI Review Game

Valuation

100

What are four ways to value a company? 

DCF, Comps, Precedent Transactions, Equity Value, EV, Sum of Parts, etc. 

Not counting Book Value of Equity- not based on the market 

200

At a high level, walk me through a Public Comps Model. What's the point of it?

Finding some comparable companies (size, operations, geography) and their valuation multiples as references for the industry; then, you can apply the median/avg to your company to get a relative value

300

What are four key valuation multiples? What are some way you can interpret a high valuation multiple? 

EV/EBITDA, EV/EBIT, P/E, EV/SALES

400

What are three pros and cons of a comps model or a DCF? 

Comps: 1) most likely outcome, 2) easy, 3) includes live market sentiment; but, 1) true comps are rare, 2) no personal input, 3) potentially inaccurate market sentiment 

DCF: 1) personal input, 2) specific to company, 3) very thorough; but, 1) forecasting is inaccurate, 2) excludes market sentiments, 3) company must have positive cash flows

500

Walk me through a DCF. 

Forecast free cash flows for near term, calculate WACC discount rate, find terminal value cash flows, and add PV of all cash flows to get EV. Then, you can back into intrinsic share price.

Case/Market Questions

100

What is a key multiple you'd look at to analyze a stock and why is it useful? 

Variable

200

Comprehensively explain, at a high level, what's going on in an industry of your choice. Point out at least three specific things. 

Must be logical 

300

What's an instance of a market over or under reaction you've seen? What caused it, and why was it over/underreacted to? 

Must be solid, logical answer 

400

Counterpitch a stock of your choice. It cannot be one from pitch night. 

Is it convincing? 

500

In one minute, pitch us a stock 

Check: 

what the company does 

why they're better than others at it 

why they will grow 

something(s) to look out for 

Financial Statements

100

Walk me through the three statements.

IS: Rev. to NI over a time period 

BS: what company owns and owes, A=L+E

CFS: NI to ∆ in cash over a time period

200

A company has high, positive profit margins but a poor, sometimes negative cash flow. What could be going on with the company? You can include industry examples (e.g. a foods company would...)

Variable

300

How do you link the three financial statements? 

NI flows to Retained Earnings and start of CFS, ∆ in cash flows to cash in BS, BS changes in current A&L flows into CFO, BS changes in LT A in CFI, BS changes in LT L&E in CFF.

400

Walk me through $50 of depreciation. Assume a 40% tax rate 

IS: expenses +$50, tax expense -$20, net income -$30

CFS: NI -$30, Depr. +$50, CFO +$20

BS: PPE -$50, Cash +$20, RE -$30, Bal. Check PASS

500

Nike buys $500,000 of 250,000 shirts on credit from their supplier. They also buy a factory for $1M with debt. Assume a tax rate of 20% Walk me through the three financial statements. 

IS: No Change 

CFS: CFO Inv -$500k, CFI CapEx -$1M, CFF +$1M, Total ∆ -$500k 

BS: Cash -$500k, Inv +$500k, PPE +$1M, Debt +$1M; BS Balances