Banking Valuation Interview Guide
This conversation was generated using Cook'd AI's career assistant and reviewed by Fallon Han from our editorial team for accuracy.
I am a second-year engineering student at a US university, and I am targeting a bulge-bracket investment banking summer analyst role in New York. If an interviewer starts with a standard modeling question, how should I walk through valuing a company step by step without sounding robotic?
Start with a clean framework and then narrate the logic. A strong answer sounds like this: first, I would value the company using a DCF and trading comparables. In the DCF, I would project revenue, operating margins, taxes, and reinvestment to get UFCF, then discount those cash flows back using WACC. I would finish with a terminal value, usually using an exit multiple or perpetuity growth method, and then adjust for net debt to get equity value. For comparables, I would look at relevant public peers, choose the right trading multiple such as EV over EBITDA or EV over revenue depending on the business, and use that range to sanity-check the DCF. The key is to explain why each assumption is reasonable, not just state formulas.
How do I defend the DCF assumptions if the interviewer pushes on why I picked a certain growth rate, margin, or discount rate?
Defend each input by tying it to the business and the industry. For revenue growth, I would anchor on historical growth, management guidance, and whether the company is gaining or losing share. For margins, I would say they should move toward a steady-state level based on scale, pricing power, and peer margins. For WACC, I would explain that it reflects the company’s cost of equity and debt, with beta, risk-free rate, and credit risk driving the estimate. If pressed, I would say I am not pretending the exact number is precise, but I am showing a logical range that is consistent with market evidence and company fundamentals.
When should I use EV over EBITDA versus EV over revenue in comps, and how do I explain that choice clearly?
Use EV over EBITDA for mature companies that are already profitable and have relatively normal capex and working capital needs. Use EV over revenue when EBITDA is negative or not meaningful, which is common for early-stage, high-growth, or heavily reinvesting businesses. A good explanation is: the multiple should match the stage of profitability and the best driver of value. If margins vary a lot across peers, EV over revenue can be a cleaner way to compare them. If the business is stable and cash generation matters, EV over EBITDA is usually more informative.
What is a concise way to connect the DCF result to the trading comps without sounding like I am just forcing the numbers to agree?
Say that the DCF gives you an intrinsic value based on the company’s own cash flow profile, while comps give you a market-based check on what investors are currently paying for similar businesses. Then mention that you would compare the implied multiple from the DCF to the peer range. If the DCF implies a much higher or lower valuation, you would revisit whether the growth, margin, or terminal assumptions are too aggressive or conservative. That shows you understand the valuation methods are complementary, not that one must mechanically equal the other.
If the interviewer asks me to defend the terminal value, what is the best answer for a summer analyst candidate?
Keep it simple and defend the logic, not the precision. You can say the terminal value captures value beyond the explicit forecast period, when the company should have reached a more stable growth and margin profile. If using an exit multiple, I would tie it to the peer set and argue that the multiple reflects a mature-state business. If using perpetuity growth, I would keep the growth rate below long-term nominal GDP and explain that it assumes the company grows at a sustainable rate forever. The important part is to show the terminal value is based on a realistic steady state, not an optimistic stretch.