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Happy Thursday, future bankers!

Hope everyone is doing well! Today we’re covering scenarios where EV/EBIT is more appropriate than EV/EBITDA, a time you struggled to learn a new concept, and Reddit’s red hot start as a public company.

🚀 Let’s get into it.

🔢 Technical Question

What is an example of a time that an EV/EBIT multiple would provide a better valuation than an EV/EBITDA multiple?

The EV/EBIT and EV/EBITDA multiples are both commonly used to value companies. However, there are certain situations where the EV/EBIT multiple might provide a more accurate valuation than the EV/EBITDA multiple.

One such situation is when a company has significant capital expenditures (CapEx). EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Because it adds back Depreciation and Amortization, it does not take into account the capital expenditures a company makes. These are often significant in industries like manufacturing, telecommunications, or utilities, where companies need to invest heavily in property, plant, and equipment.

On the other hand, EBIT (Earnings Before Interest and Taxes) does take into account Depreciation and Amortization, which are proxies for CapEx. Therefore, for a company with high CapEx, the EV/EBIT multiple might provide a more accurate valuation because it considers these expenses.

In summary, while both multiples have their uses, the EV/EBIT multiple can sometimes provide a better valuation than the EV/EBITDA multiple, particularly for companies with significant capital expenditures.

🗣 Behavioral Question

Tell me about a time that you struggled to learn a new concept.

Consider the following best practices:

1. Choose a Relevant Example: Select a situation that is relevant to the internship or role that you’re applying for. It could be a challenging financial concept or a topic from one of your classes.

2. Describe the Situation: Clearly articulate the concept you were trying to learn and why it was challenging. This sets the context for your struggle and eventual learnings.

3. Detail Your Struggle: Explain the difficulties you faced. This could include a steep learning curve, lack of resources, poor instruction, or difficulty in understanding the concept’s practical applications.

4. Highlight Your Approach: Discuss the steps you took to overcome the challenge. This could involve seeking help from a mentor, using online resources, or breaking down the concept into smaller, manageable parts.

5. Showcase Your Growth: Highlight how you eventually mastered the concept and how it contributed to your personal or professional growth. This could be a project you successfully completed using the new concept or how it helped you make better decisions.

6. Reflect on the Experience: Conclude by sharing what you learned from the experience. This could be a newfound appreciation for continuous learning or a strategy you developed for tackling complex concepts in the future.

Remember, the interviewer is interested in understanding your problem-solving skills, resilience, and ability to learn from challenges. So, ensure your response reflects these qualities.

🗞 Industry News

💸 Reddit Stock Soars On First Day of Trading

Reddit made a splash in its public trading debut, with shares closing at $50.44, a 48% increase from its initial offering price of $34. The stock’s opening price was $47 and it quickly soared to trade above $53 within the first few minutes of trading. This debut on the New York Stock Exchange was eagerly anticipated, marking the first major social media company to go public since Pinterest in 2019. Reddit, known for its user-generated discussion-style platform, gained significant recognition during the 2021 meme frenzy when retail traders on the subreddit WallStreetBets encouraged short squeezes on heavily shorted stocks.

Read more about this story below.

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!