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Happy Friday, future bankers!

Hope everyone is doing well and congrats on making it to the end of the week! Today we’re going over times that you wouldn’t use a DCF, talking about someone you look up to, and Carvana’s surge back to relevancy.

🚀 Let’s get into it.

🔢 Technical Question

“What are some examples of times where you would not use a DCF to value a company?”

A Discounted Cash Flow (DCF) valuation is a powerful method for estimating the value of an investment based on its expected future cash flows. However, there are several situations where a DCF might not be the most appropriate valuation method:

1. Unstable or unpredictable cash flows: DCF relies on the ability to predict future cash flows. If a company’s cash flows are highly volatile or unpredictable, a DCF valuation may not be reliable.

2. Early-stage companies: Startups and other early-stage companies often don’t have a history of cash flows, making it difficult to estimate future cash flows.

3. Companies with no positive cash flows: If a company is not generating positive cash flows and is not expected to do so in the foreseeable future, a DCF valuation may not be appropriate.

4. Distressed companies: For companies facing bankruptcy or other forms of financial distress, liquidation value or salvage value may be more relevant.

5. Companies in rapidly changing industries: In industries where technological change is rapid and disruptive, future cash flows can be very difficult to predict.

Remember, while DCF is a powerful tool, it’s just one of many valuation methods. Others, like comparable company analysis or precedent transaction analysis, might be more appropriate depending on the situation. It’s important to understand the strengths and weaknesses of each method and to use your judgment about which is most appropriate in a given situation.

🗣 Behavioral Question

"Who is someone that you look up to?"

This question is similar to the previous one, but with a different person and reason. Here are some best practices for answering the question:

• Avoid choosing someone who is too controversial or political.

• Explain why you look up to this person, how they influenced your career choices or goals, and what you learned from them. Provide specific examples of their achievements, qualities, or actions that you admire or emulate.

• Show how this person’s influence has shaped your personality, values, and motivation. Demonstrate how you have applied their lessons or advice to your own life, education, or work.

• Be honest and enthusiastic. Don’t make up a person or a story that is not true or genuine. Express your admiration and gratitude for this person in a sincere and positive way.

Example Response:

“One person that I look up to is my high school track coach, who was also a former Olympic athlete. He inspired me to push my limits and live with a growth mindset. He taught me that hard work, discipline, and perseverance are the keys to success in any field. He also showed me how to overcome challenges, learn from failures, and celebrate achievements. I learned a lot from his insights and wisdom, such as the importance of having a vision, taking calculated risks, and being adaptable. He is someone that I respect and appreciate in my professional and personal life.”

🗞 Industry News

Carvana Surges Back to Life 🚘

Carvana's stock is doing a victory lap after the company surprised everyone with its first-ever annual profit and optimistic outlook. This is a major turnaround for a company that not long ago had folks whispering about bankruptcy. Carvana's focus on getting its finances in order seems to be paying off in a big way. Of course, some analysts are still a bit skeptical about the long-term picture, especially whether Carvana can keep the momentum going.

The stock's wild ride also included a short squeeze, leaving short-sellers scrambling. Analysts are now taking another look, with some getting more positive while others remain firmly in the "wait and see" camp.

Read more about this story below.

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Thanks for tuning in today! Best of luck to everyone working through recruiting right now. If you sign an offer, reply to this email and let us know about it! Like seriously, do it—we’d love to hear about it!