Case Study Help/Preparation
In an interview process, I've been assigned a case study on an equity and have currently been given vague details - 'it should have my model/valuation and a write up of my recommendation.' I have a couple of questions and any guidance here would be much appreciated:
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How should my write up be structured?
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What are the most significant components to include in evaluating this equity in the write up?
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What are some of the best sources for researching the company, its background, peers, industry, etc?
- What is the order in which I should perform (not write but perform as I come to an investment recommendation) my analysis? (e.g. 1) valuation, 2) industry/competition/positioning vs peers, 3) idiosyncratic outlook/strategy. 4) macroeconomic analysis?
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Specifically, should I even include the macroeconomy in a case study for one specific equity?
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What valuation methodologies should I specifically use? DCF, comps, anything else? If the company is not profitable currently, is it too speculative to eventually project positive FCF/do I just need to do a EV/rev multiple off comps?
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Also for the valuation --> if the company recently entered into a merger agreement or secured new financing or initiated an exchange offer, how can I implement all of this to most accurately value the company?
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Given that this is a holding company, how can I do a net asset value as the company's holdings are likely worth more than the parent itself?
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*What are the most important aspects of a write-up that will best support an investment recommendation?
Any answers to the following and tips in general would be awesome - thank you all very much in advance.
Based on the most helpful WSO content, here are detailed answers to your questions regarding preparing a case study on an equity:
Write-Up Structure
Significant Components in Evaluating Equity
Best Sources for Research
Order of Analysis
Inclusion of Macroeconomy
Valuation Methodologies
Incorporating Recent Developments
Net Asset Value (NAV) for Holding Companies
Important Aspects of a Write-Up
These guidelines should help you structure your case study effectively and provide a comprehensive evaluation of the equity. Good luck with your interview preparation!
Sources: What are the most important aspects of an offering memorandum/offering memorandum?, Equity Research writing test+modeling test next Tuesday, seeking for advice, https://www.wallstreetoasis.com/forum/private-equity/thinking-like-an-investor-the-key-financial-metrics?customgpt=1
Not to be super annoying, but these are questions you probably should have asked yourself before pursuing a career/interview pitching stocks, no? It definitely makes sense to need feedback on things, and I have pursued a ton of feedback/help here as well, but you basically asked how to do everything.
Did you pitch a stock in the interview? How have your other pitches worked?
These aren't specific sections or slides or anything, but a very generalized flow:
1) introduction of idea + the business + upside/downside; it should be immediately understandable up front what the thesis is. If you can't distill what you are pitching into 1-2 sentences, keep at it. Overview of everything to come basically
2) Overview of what the business does and the industry they operate in (trends, structures, growth, market share, narratives, etc.)
3) Key thesis points (1-3 key elements to the story)
4) Key risks, and potential mitigants
5) Valuation and risk/reward. Addl. recap of variance to street estimates + quantifying it all
General tips: Your job isn't to explain every detail about a company. Its not a descriptive exercise. Everything should tie back to why the opportunity exists and the key elements that drive the story. Weaving numbers behind narrative to illustrate why you can make money. Isolate key drivers, highlight the levers that get you paid + catalyst path, why the misperception may exist, and why the risk/reward is advantaged.
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