Preparing for an equity research interview involves anticipating a mix of general, experience-based, and highly technical finance questions. Success hinges on demonstrating both your technical financial modeling skills and your strategic thinking. Based on our assessment experience, a structured approach using methods like STAR (Situation, Task, Action, Result) can significantly improve your response clarity and impact.
What General Questions Can You Expect in an Equity Research Interview?
General questions aim to assess your personality, career motivations, and cultural fit with the firm. Your answers should show you've done your homework on the company and have a clear career trajectory.
- "Tell me about yourself." Craft a concise 60-90 second pitch that connects your background to the role.
- "Why are you interested in this company/role?" Link your skills and interests to the firm's specific research focus (e.g., a particular sector).
- "What are your salary expectations?" Research the standard salary bandwidth for the role and location. A response like, "Based on my research and experience, I expect a package in the range of $90,000 to $110,000," demonstrates market awareness.
- "Where do you see yourself in three years?" Express a desire to grow as a proficient equity research analyst, deepening your sector expertise.
The key is to move beyond generic answers and provide specific, company-aware responses that showcase your genuine interest.
How Do You Showcase Your Experience and Background?
Interviewers use these questions to verify your technical foundation and past accomplishments. Use the STAR method to structure your answers for behavioral questions.
- "Describe your experience as an equity researcher." Quantify your achievements. For example, "I was responsible for covering 15 companies in the tech sector, and my 'sell' recommendation on Company X ahead of its earnings miss helped clients avoid an average 20% portfolio drawdown."
- "What are the most common ratios used to analyze a company?" Be prepared to explain key valuation multiples like P/E (Price-to-Earnings), P/B (Price-to-Book), and EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization).
- "Which digital tools did you use?" Mention specific platforms like Bloomberg Terminal, FactSet, or Capital IQ to establish your technical proficiency.
Providing concrete examples with measurable results is far more powerful than stating general responsibilities.
What In-Depth Technical Questions Will You Face?
This segment is the core of the interview, designed to test your analytical rigor and understanding of financial concepts. Expect questions that require on-the-spot calculation or analysis.
- "How do you value a company?" You should be able to discuss and compare the three main valuation methodologies: Discounted Cash Flow (DCF), comparable company analysis, and precedent transactions.
- "Walk me through a DCF." A clear, step-by-step explanation is crucial: 1) Forecast free cash flows, 2) Calculate the discount rate (WACC), 3) Determine the terminal value, 4) Discount everything to present value.
- "Pitch me a stock." This is a classic test. Have a long and a short idea ready. Your pitch should include the company's thesis, key drivers, valuation, and potential risks.
- "What is the difference between enterprise value and equity value?" A fundamental question. Explain that Enterprise Value (EV) represents the company's total value to all investors (debt and equity holders), while Equity Value is the value available to shareholders. The formula is EV = Equity Value + Debt - Cash.
| Concept | Definition | Key Use |
|---|
| EBITDA | Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of core operational profitability. | Comparing company performance without the effects of financing and accounting decisions. |
| Terminal Value | The present value of all future cash flows of a company beyond the explicit forecast period in a DCF model. | Capturing the bulk of a company's value in a DCF model, as cash flows are assumed to grow perpetually. |
To excel, practice articulating your thought process out loud, even for complex calculations. Interviewers value a logical approach as much as the final answer.
How Can You Formulate Winning Answers?
Preparation is non-negotiable. For technical questions, ensure your foundational knowledge is solid. For behavioral and stock pitch questions, practice your delivery.
- For a stock pitch: Structure it like a professional report: investment thesis, business overview, industry analysis, valuation, and risk factors.
- For a question like, "What would you do with £1 million to invest?" Demonstrate a diversified strategy. For example: "I would allocate 60% to a mix of high-quality growth and value stocks, 20% to government bonds for stability, 10% to real estate investment trusts (REITs), and 10% to cash for opportunistic buys during market dips." This shows strategic asset allocation understanding.
The most critical advice is to practice extensively. Rehearse your answers to common questions, refine your stock pitch, and ensure you can explain complex topics simply. This level of preparation will build confidence and allow you to present yourself as a knowledgeable and compelling candidate.
Share
