Why spread comps

Except, like, grand larceny. If the group head wants you to take his tennis racket in for stringing, have his overgrip replaced, too. Your associate sends you out for Shake Shack, bring back a few extra shakes. Morale on Wall Street is at an all-time low right now — layoffs, deal slowdown, and the impending implosion of Europe will do that — and any bit of joy you can bring to your godforsaken colleagues will be met with childlike enthusiasm.

In , with a few exceptions at the more old-line firms and hedge funds, no boss is going to ask you to go to a strip club and pay in quarters, or bring him a cheesesteak from Philadelphia, or any of those legendary Wall Street hazing rituals.

That said: If someone wants to haze you, play along! Again, though, no grand larceny. As a summer analyst, you are not expected to do well — you are expected not to do badly.

At the end of the summer, when your supervisors gather to decide which interns get full-time offers, no one will remember the comps model you pulled an all-nighter on.

Everyone, though, will remember the reply-all you sent about the hot Asian girl in sales. Perfecting the second kind of interaction is the single most important piece of advice we can possibly give you for your summer on Wall Street. A recap for visual learners:. Also : send tips to Daily Intel about the ridiculous things you see — but not from your work account!

It works, we promise! But you were right that brown shoes are also permissible, and maybe even preferable. Already a subscriber? Of course, to spread comps manually for every pitch book is not a good use of time.

Most investment banking coverage or industry groups will have a comp database that covers all of their client universe. When investment bankers need to throw the comps in a new presentation, they can just grab the latest comps from the main file.

This obviously means that comps need to be up to date and thoroughly vetted. The general rule is that analysts will spread the comps and associates will check the comps. At least in theory, comps should be updated the same day any new information comes out. So if a press release comes out in the morning 8-K or if earnings are released in the evening, the analyst should adjust the comp to reflect the latest information as an efficient stock market will react to that information.

The Excel comp sheet is huge and the first time comping a company can take quite a large amount of time, especially if it is a niche industry. However, once analysts get into the swing of things, comps become a fairly quick exercise 30 minutes max assuming that the company is not comped from scratch as it is easy to trace what was done before — assuming it was right — and companies do not usually change drastically from one report to the next in terms of capital structure. New hires that do not have comp responsibilities in particular, MBA associates who may be responsible for checking comps for accuracy may find it helpful to comp from scratch in a copy of the comp file saved in their own personal drive.

If the numbers line up, they can know it was done correctly. This is particularly important for new associates who were not promoted from analyst, or analysts that have other experience coming in as a 2nd or 3rd year — they need to know the comps better than any first year or summer student. But ya If you work in a big group like FIG or TMT , your group already has a standard set of comps that it uses for the different industry subsectors.

For fixed line telcos there will be a set of companies, for mid-size cable companies another set of companies, wireless The seniors will always tell you what comps they want in the presentation-and it will always be comps that the group "maintains" or updates every quarter. One of the analyst's duties is to update their comps with the latest quarterly info taken from 10Qs cash, debt, options, investments, minority interests.

Once these are updated every quarter, you just need to change the date in the main excel mode and hit refreshl-that in turn will update your comps with the latest Real Time MARKET information share price, broker estimates from whatever service provider your bank uses Factset, CapIQ - assuming your model is all linked up to Factset and ready to go.

Competition under 10k 2. Research report from Thomson 3. Previous comp used before for that industry usually will be some overlaps in tech.

I have a number of SA interviews coming up, and have already had a few over the phone. What's the most effective way to discuss this item? Should I discuss why I chose individual companies, what kinds of screens I ran? The mechanical act of creating the comps wasn't exceptionally difficult, aside from a few adjustments to get everything on the same basis time-wise.

I want to show that I know what I'm doing. How in depth would they grill you about something like normalization of financials i. How are you choosing comps - 1. Industry 2. Size 3. Geographic location. I really can't imagine someone would grill you that deep into this, though who knows. I've never personally been asked about comps beyond a pretty basic level, but I also don't emphasize it to a real degree on my resume.

Appreciate the advice. I am by no means an expert, so take my 2 cents for what it is worth and still in undergrad myself. I will first say that you should NEVER put anything on your resume that you can't properly explain as your first bullet point for any experience.

You are basically just opening up "Pandora's Box. That being said the way I would attack that question is in a minute summary showing that you know comps. They are most likely not as interested in telling them how to build them , as they are the most simple kind of model to build if you can even really consider it a model.

The three main styles of comps are Transaction, Fundamental and Valuation sometime called market comps. In Fundamental Comps you are looking at current year and consensus estimates of similar companies to see what firm has the highest or lowest growth potential. Some items found in a fundamental Comp are stock price, shares outstanding, market cap, revenue, ebit and eps just to name some.

With Valuation comps you look trailing and forward ratios to see how the market is valuing that firm. You want all these figures apples to apples so I would personally use Calender year figures Vs. Fiscal Year. I think this is a much better answer then telling them how to build one.

It shows you understand the practical application of the Comparable Analysis. Anyone can read a interview guide to tell them how to do a calculation. Because this is the theoretical value of a firm if you purchased it today with no premium.

You would need to buy out the shareholders market cap , Pref stock holders, purchase the minority interests and the debt, using the cash to pay down whatever debt you could. Another way to think of this is that cash is already accounted for in the value of the equity market cap , so adding this would be double counting cash.

Investors look at cash on hand when valuing companies, this is the rational behind this. Thanks for the detailed answer. I think you hit the nail on the head in terms of avoiding a simple mechanical explanation. If you were interviewing me, would you expect me to have really specific metrics i.

Or is it more important to understand why debt is added to EV? I have similar concerns in terms of share count dilution and adjustments. I understand these items but did not mechanically do them in this particular case. Well I have never been asked, walk me through how to build a comp table. So that being said, if you really feel that you need an efficient way to say how, I would just write down how you did it over the summer on a word document and try to simplify it in a minute or two.

There is no shame in saying "My boss had all the summer analysts use CapIQ to gather information, then we would re-format it in the companies templates.

I don't think you need to worry about about how to compute dilution treasury stock method perfectly. I will say understanding that there is a relationship between the average strike of the options outstanding, and the current price now is how diluted shares is computed is a good to know just in case. Def never got that question. Its funny how finance is a BS Bachelor of science , but it is really more of an art with applied science techniques.

Especially in Equity Research. At least in my experience. A good example is when I was once asked how to calculate Free Cash Flow. It shows that you have put some thought into WHY you do it. If you understand why you do something, it makes the process very trivial. More of a logical expression then some math equation that you read someplace. It shows that your interested in the reasoning behind the answer, and what it actually implies; shows that you have a real passion for business finance.

As far as specifics go for debt and what not, on banking interviews no. If the firm your worked for over the summer focuses on one sector then you better know that sector decently well. The metrics that are most looked at by investors.

Most importantly, why they are important to investors. If you were interviewing for a Corp Dev team, then I would say you better research that company's industry like the back of your hand.

Again they are looking for people that have good reasoning skills. That can handle stressful situations. Sometimes you may get a question that you cant answer, and that is fine. Can you reason your way through it? Then ask the interviewer if that is the appropriate methodology?

You don't know what you don't know, and you wont know until you ask. Dude, you need to chill out and stop worrying. The work you are doing is what IB analysts do, and with the functionality of Cap IQ, this is how you "spread comps ". I promise you will get more out of your internship if you sit back, soak in everything your learning, and try to become an expert at all of the tasks you are assigned rather than worrying about how you will position this experience.

If I remember correctly, you are a sophomore? If so, you are getting extremely relevant experience for next summer. On a serious note - 'spreading' refers to spreadsheets. If you're putting numbers in excel, you're spreading. And yeah, chill out, you'll be fine. What's worse, shoveling snow or spreading comps? So what's worse, the day-to-day banking grind or shovelling snow. My sore back and the past 2. Comps are often outsourced to India, at least that was the case at my BB. We used Copal, and once you got them set up and doing the right adjustments took a few quarters they did a good job.

Obviously you have to check through them and still do it as a training exercise, but comps aren't very value add. So, I'm gonna go with the more expensive to outsource, which is comps. And most would hope to never work with someone that practices spreading comps. People always get busted on this site for saying one thing and then hoping nobody remembered and saying another Sorry bud - didn't mean to give you something you weren't looking for. FWIW, London didn't ask you if you would ever want to work with him, but you still chimed in on that front.

I would guess that, most likely, you'll be using Excel ' I know at my boutique they do, but I can only speak for my bank. Sint est soluta delectus repudiandae veritatis. Omnis fugit provident alias ut nulla ab est. Eos quis perferendis esse illo fugiat.

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