Valuation
Articles
Comparable Company Analysis (CCA): A Complete Guide to Relative Valuation
How do investors determine whether a stock is overvalued or undervalued? One of the most commonly used valuation techniques is Comparable Company Analysis (CCA), also known as Relative Valuation.
What Is Enterprise Value? A Plain-English Guide
Enterprise Value explained: what it measures, how it differs from market cap and equity value, and why finance interviewers care so much about the difference.
How to Calculate Enterprise Value in an Interview
The Enterprise Value formula, step by step, plus the follow-up questions interviewers actually ask — minority interest, preferred stock, and the EV-to-equity bridge.
Enterprise Value vs. Equity Value: What's the Difference and Why It Matters
Enterprise Value and Equity Value measure two different things. Learn the difference, the bridge formula between them, and why interviewers test this constantly.
How to Bridge Enterprise Value to Equity Value: A Step-by-Step Interview Example
A step-by-step walkthrough of the EV-to-equity bridge using a simple $100M EBITDA example — exactly how interviewers expect analyst and associate candidates to answer.
What Does a Valuation Multiple Actually Mean? EV/EBITDA and P/E Explained
EV/EBITDA, EV/Revenue, and P/E explained in plain English: what valuation multiples measure, why similar companies trade at different multiples, and how to read them like an interviewer expects.
How to Answer "What Does an EV/EBITDA Multiple of 8x Mean?" in an Interview
A step-by-step framework for EV/EBITDA multiple interview questions: how to compute the implied Enterprise Value, benchmark it, and explain what drives multiple gaps between peers.
What Makes a P/E Ratio "Expensive"? A Framework for Judging Multiples
A 20x P/E ratio isn't inherently expensive or cheap. Learn the growth (PEG), industry, and interest-rate framework analysts actually use to judge a valuation multiple.
DCF vs. Comparable Companies vs. Precedent Transactions: What's the Difference?
DCF, comparable companies, and precedent transactions each value a company differently. Here's what each method actually measures and why their outputs diverge.
"Which Valuation Method Do You Trust Most?" — How to Answer This in an Interview
A step-by-step framework for the classic DCF vs. comps vs. precedents interview question, with a worked numerical example you can reuse on the spot.
What Is Comparable Company Analysis? Trading Comps Explained
A plain-English guide to comparable company analysis (trading comps): how peer sets are built, why EBITDA gets adjusted, and how EV/EBITDA multiples are read.
How to Answer a Comparable Company Analysis Interview Question
A step-by-step framework for answering comps interview questions: picking peers, scrubbing one-time items, and defending your implied valuation.
What Is a Precedent Transactions Analysis? Control Premiums Explained
A clear breakdown of precedent transaction analysis in valuation: why multiples include a control premium, and how strategic vs. financial buyers differ.
How to Answer "Walk Me Through a Precedent Transactions Analysis" in an Interview
A step-by-step framework for answering the precedent transactions interview question, including deal screening, control premiums, and buyer-type splits.
What Is Sum-of-the-Parts (SOTP) Valuation and Why Does It Matter?
A breakdown of how sum-of-the-parts valuation works for conglomerates, why blended multiples mislead, and what the conglomerate discount tells investors.
How to Answer a Sum-of-the-Parts Valuation Question in an Interview
A step-by-step framework for tackling SOTP valuation interview questions: segmenting the business, picking peer multiples, and bridging to equity value.
LTM vs NTM Multiples: What's the Difference and Why It Matters in Valuation
LTM and NTM EV/EBITDA multiples can tell very different stories about the same company. Here's what each measures, why they diverge, and when to trust which one.
How to Answer an LTM vs NTM Multiples Interview Question
A step-by-step framework for explaining why a company's trailing and forward EV/EBITDA multiples diverge, with a worked example and the follow-up interviewers expect.
What Is Diluted Share Count? Basic vs. Diluted Shares Explained
Diluted share count adds the shares a company could issue from options and convertibles. Learn the difference between basic and diluted shares, and why it matters for valuation.
How to Calculate Diluted Share Count in an Interview (Treasury Stock Method)
A step-by-step walkthrough of calculating diluted share count using the treasury stock method for options and the if-converted method for convertibles — the way interviewers expect it.
Enterprise Value vs Equity Value: What's the Difference?
Enterprise Value and Equity Value are easy to confuse in finance interviews. Learn what each represents and every adjustment in the full bridge between them.
How to Calculate Equity Value from Enterprise Value (Interview Guide)
A step-by-step interview walkthrough for bridging Enterprise Value to Equity Value per share, covering net debt, minority interest, and more.
What Is IRR-Based Pricing in Private Equity? The PE Approach to Valuation
Private equity funds don't value targets the way equity analysts do. Learn how PE firms work backward from a target IRR to set the maximum price they can pay for a deal.
How to Calculate the Maximum Price to Pay for an LBO Target (Interview Walkthrough)
Step-by-step interview walkthrough for the classic PE question: back into the maximum entry multiple a fund can pay for a target given its IRR hurdle.
What Is the Residual Income Model (EVA) in Valuation?
Why the Residual Income / EVA model often beats a DCF for valuing banks and capital-intensive businesses, and how the capital charge and cost of equity drive it.
How to Calculate Residual Income (EVA) in a Finance Interview
A step-by-step walkthrough for answering a Residual Income Model interview question: book value roll-forward, capital charge, discounting, and terminal value.
What Is the Conglomerate Discount? Why Diversified Companies Trade Below Their Parts
The conglomerate discount explained: why diversified companies often trade for less than the sum of their business segments, and why activist investors target it.
How to Calculate a Sum-of-the-Parts (SOTP) Valuation, Step by Step
A step-by-step walkthrough of building a sum-of-the-parts (SOTP) valuation for a multi-segment company, including the conglomerate discount, for interview prep.
What Are M&A Synergies? Revenue Synergies vs. Cost Synergies Explained
A clear breakdown of M&A synergies: what revenue and cost synergies actually are, why cost synergies are more reliable, and why interviewers care so much about this distinction.
How to Value M&A Synergies in an Interview: A Step-by-Step Framework
The exact step-by-step framework for valuing M&A synergies in a finance interview: ramping, risk-adjusting, taxing, discounting, and comparing to the deal premium.
Diluted EPS Explained: The Treasury Stock Method and If-Converted Method
Why basic EPS isn't the number that matters, and how the treasury stock method and if-converted method turn options, RSUs, and convertibles into fully diluted EPS.
How to Calculate Fully Diluted Shares Outstanding (Interview Walkthrough)
A step-by-step framework for answering 'walk me through fully diluted shares outstanding' — covering the treasury stock method, RSUs, and the if-converted test for convertibles.
Why Do DCF, Comps, and Precedent Transactions Give Different Valuations?
DCF, trading comps, and precedent transactions rarely agree on a company's value. Here's why each method sees something different — and what the gap actually means.
How to Reconcile Conflicting Valuation Methods in an Interview Answer
Interviewers love asking what you do when DCF, comps, and precedent transactions disagree. A structured framework — with a worked example and common mistakes to avoid.
Cases
What Is Enterprise Value?
Why not just market cap: debt, cash, minorities — the intuition
EV-to-Equity Bridge (Intro)
As a junior analyst, you're given a private company's EBITDA and asked to calculate its Enterprise Value using a market trading multiple, then bridge that Enterprise Value to Equity Value by accounting for the company's debt and cash.
What Is a Valuation Multiple?
How to read "8x EBITDA," what it implies about the business
"Is 20x P/E Expensive?"
As a financial analyst, you're asked in an interview: "Is a 20x P/E ratio expensive?" Walk through how you'd answer that question, using growth, industry, and the interest rate environment to give the number context.
Three Valuation Methods
As a financial analyst, you're asked in an interview: "We use three main valuation methods — DCF, comparable companies, and precedent transactions. When do you trust one over the other, and why do banks run all three together?" Walk through how you'd answer that question, using a real example to show how the three methods can diverge and what that divergence tells you.
Comparable Company Analysis
Peer selection, scrubbing one-time items, reading the multiple spread
Precedent Transactions
Control premium, time period selection, strategic vs. financial buyer premiums
Sum-of-the-Parts Valuation
Breaking apart a conglomerate, segment-level multiples
LTM vs. NTM Multiples
As an equity research associate, you are tasked with computing a fast-growing target's EV/EBITDA multiple on both a trailing (LTM) and forward (NTM) basis, and using the comparison to peers to judge whether the stock is really as expensive as the trailing multiple suggests.
Diluted Share Count
Walk me through how you would calculate a company's fully diluted share count, including the treasury stock method for in-the-money stock options and the if-converted method for convertible securities.
Full EV-to-Equity Bridge
As a valuation analyst, you are tasked with bridging Enterprise Value to Equity Value for a mid-cap industrial company, applying the full adjustment stack: net debt, minority interest, investments in associates, pension deficit, and capitalized lease liabilities.
How PE Thinks About Valuation
As a private equity associate, you are tasked with determining the maximum entry multiple your fund can pay for a target today, working backward from the fund's target IRR rather than forward from a standalone valuation.
Residual Income Model
As a valuation analyst, you are tasked with building a Residual Income (Economic Value Added) valuation for a bank and explaining why this approach can outperform a standard discounted cash flow (DCF) model for banks and other capital-intensive businesses.
Conglomerate Discount
As an equity research analyst, you are tasked with calculating the sum-of-the-parts (SOTP) value of a diversified conglomerate and determining whether — and by how much — the stock trades at a discount to that value, the gap activist investors typically target.
Synergy Valuation
As an M&A analyst, you are tasked with valuing the expected synergies in a proposed acquisition — risk-adjusting them for realization probability, taxing them appropriately, discounting them to present value — and using that figure to judge whether the price your company is paying for those synergies is actually justified.
Dilution Deep Dive
As a valuation associate preparing a fully diluted share count for a merger model, you are tasked with applying the treasury stock method to a company's in-the-money stock options and unvested RSUs in full detail, applying the if-converted method to its outstanding convertible notes, and then quantifying how each dilutive security changes diluted EPS.
When Valuation Methods Conflict
Reconciling DCF vs. comps vs. precedents: what the gap tells you