TRADING COMPS MODELING WALL
STREET PREP ACTUAL SCRIPT WITH 100
PERCENT CORRECT ANSWERS
◉ Oil and gas / energy companies
Answer: EV/debt adjusted cash flow (DACF)
EV/EBITDAX (X stands for exploration expense)
EV/UFCF
◉ Real estate investment trust (REITs)
Answer: Share price / FFO per share
Share price / AFFO per share
Funds from operations = Net income + D&A + Gains on sale
Adjusted FFO = FFO - Capex + Nonrecurring items
◉ Selecting peer groups
Answer: Similar operational characteristics -
Nature of business (industry, products, markets, customers)
Industry position
Seasonality/cyclicality
Similar financial characteristics -
Size
, Leverage
Growth
Margin
◉ Resources can help determine which companies are
comparable
Answer: Primary resources -
10K competition section
Equity research
Colleagues familiar with the industry
Form 8k related to merger (within fairness opinion)
NAICS/SIC code screens
News article/SIC code screen
Clients (only when applicable)
3rd party services -
FactSet
CapIQ
◉ Process of building comps
Answer: 1. Pick comps
2. Calc multiples
3. Present results
STREET PREP ACTUAL SCRIPT WITH 100
PERCENT CORRECT ANSWERS
◉ Oil and gas / energy companies
Answer: EV/debt adjusted cash flow (DACF)
EV/EBITDAX (X stands for exploration expense)
EV/UFCF
◉ Real estate investment trust (REITs)
Answer: Share price / FFO per share
Share price / AFFO per share
Funds from operations = Net income + D&A + Gains on sale
Adjusted FFO = FFO - Capex + Nonrecurring items
◉ Selecting peer groups
Answer: Similar operational characteristics -
Nature of business (industry, products, markets, customers)
Industry position
Seasonality/cyclicality
Similar financial characteristics -
Size
, Leverage
Growth
Margin
◉ Resources can help determine which companies are
comparable
Answer: Primary resources -
10K competition section
Equity research
Colleagues familiar with the industry
Form 8k related to merger (within fairness opinion)
NAICS/SIC code screens
News article/SIC code screen
Clients (only when applicable)
3rd party services -
FactSet
CapIQ
◉ Process of building comps
Answer: 1. Pick comps
2. Calc multiples
3. Present results