How to model EPS & EPS Growth Rate for an Equity Research job interview

Описание: In this video you will learn how to calculate EPS and EPS growth rate for an equity analyst interview. I’ll present an illustration of how to model earnings per share and earnings per share growth rate, and I’ll give you tips about how to talk about EPS and EPS growth rate in an equity research interview.

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EPS is essentially a measure of the profitability of a company. However, sometimes it can be gamed by the company. So make sure you look at earnings quality when you are calculating the EPS growth rate. If a company has a lot of non-GAAP adjustments they may be manipulating earnings. Also if they are doing a lot of share buybacks or issuances, that also signals earnings distortion possibly.

EPS growth rate is calculated by finding net profit for a company and then dividing it by the weighted shares outstanding. You find the net profit by taking revenues, subtracting out cost of goods sold and other operating expenses, and then you arrive at EBIT or earnings before interest and taxes. You then deduct interest expense and taxes. You may want to use basic shares outstanding or you may use diluted shares outstanding. If you use basic shares outstanding then you are calculating basic earnings per share, and if using diluted shares outstanding you are using diluted earnings per share.

You need to be able to assess EPS and EPS growth rates if you are going to an equity analyst interview, a portfolio management job interview, or trying to get an equity research analyst job or a portfolio manager job. Look at the general trends in the industry and look past just the short term estimates and analyst consensus. Have a vision all your own; this will set you apart from the other analysts and allow you to have a higher chances of securing your job in equity research. Before your equity research interview, talk to the company’s vendors, competitors, and other participants in the industry. This will give you a street level look at the company’s true EPS growth rate and allow you to rock your equity analyst job interview.

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TIME STAMPS
1:30 What is EPS and how to calculate EPS in an equity research model using Excel
2:28 Difference between basic EPS and diluted EPS
3:05 How to model EPS growth rate
3:16 A tip about how to adjust EPS growth rate if you are following what the equity analysts on the sell side say about it
3:48 Why EPS growth rate is important
4:45 Why earnings quality matters when analyzing EPS growth rate for a company and how companies game EPS and EPS growth rate
5: 55 Tip talking about EPS in an equity research job interview

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