8/15/23, 6:17 PM Completed Exam | Wall Street Prep

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Review: Trading Comps Modeling Retake Exam

Question 1
The next two questions use data from Athenahealth financial filing, which can be downloaded by clicking here.
The next two questions will use the following scenario:
It is July 4, 2017 and you are asked to perform a company profile for Athenahealth (ATHN), with a latest closing share price of
$140.07. The company’s most recent earnings report was for the first quarter 2017 for the period ending 3/31/2017.
Calculate ATHN’s LTM Non-GAAP operating profit. Use the company’s own definition of Non-GAAP operating profit when arriving
at your calculations.
Hint: You only need the Q1 2017 and Q4 2016 press releases to answer this question.
26.6
27.4
130.1
 132.3
154.3

Question 2
This question uses the same  Athenahealth data as the previous question, which can be downloaded by clicking here.
This question uses the same scenario as the previous question, repeated below:
It is July 4, 2017 and you are asked to perform a company profile for Athenahealth (ATHN), with a latest closing share price of
$140.07. The company’s most recent earnings report was for the first quarter 2017 for the period ending 3/31/2017.
Calculate ATHN’s enterprise value.
Hint: You only need the Q1 2017 10Q and the 2016 10K to answer this question.
5,655.00
5,682.80
 5,809.00
5,823.45
5,915.70

Question 3
A Company has the same level of Operating Income for Q1 of two consecutive years. However, for the more recent Q1, levels of
D&A dropped.
When you compare the Company’s most recent Q1 LTM EBIT and EBITDA to those of its last complete fiscal year, you would
expect:
LTM EBIT to increase, LTM EBITDA to decrease
LTM EBIT to increase, LTM EBITDA to increase
LTM EBIT to stay flat, LTM EBITDA to stay flat
 LTM EBIT to stay flat, LTM EBITDA to increase
LTM EBIT to stay flat, LTM EBITDA to decrease
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Question 4
Which of the following statements is most correct about building a comparable company analysis?
It is never appropriate to include the target company in the peer group.
Using the peer group’s average multiple is preferable to using the peer group’s median multiple when you suspect significant

outliers.
When EBITDA forecasts are available, share price valuation using EV/next year EBITDA is always preferable to valuation using
EV/LTM EBITDA.
Comps analysis is preferable to the DCF for valuing the share price of public companies because the market is providing a clear
valuation signal.
Valuing the share price of a company based on the P/E of its peers is not as useful as valuing based on the EV/EBITDA of
its peers when the target and peer group have widely differing leverage.

Question 5
The next two questions use data from the “HealthRx Excel Worksheet”, which can be downloaded by clicking here . 
The next two questions will use the following scenario:
You are advising HealthRx on a potential sale of its business (a “sell side”). You have been assigned the task of performing a
comparable company analysis for HealthRx in order to present a reasonable valuation range for HealthRx. You have compiled all
the relevant data in the downloadable file given above.
Excluding HealthRx from the peer group, what is the per share equity value of HealthRx based on the average peer group LTM P/E
ratio?
38.38
38.87
39.04
40.36
55.15

Question 6
This question uses the same data as the previous question, which can be downloaded by clicking here . 
This question uses the same scenario as the previous question, repeated below:
You are advising HealthRx on a potential sale of its business (a “sell side”). You have been assigned the task of performing a
comparable company analysis for HealthRx in order to present a reasonable valuation for HealthRx. You have compiled all the
relevant data in the file we’ve given you above.
Including HealthRx in the peer group, what is the per-share equity value for HealthRx based on the peer group’s median Year 1
EV/Revenue multiple?
 142.08
145.81
151.65
152.27
156.04

Question 7
Which valuation multiple is most appropriate when a peer group includes companies with different depreciation methods and
negative EBITDA?
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P/E
EV/EBIT
EV/EBITDA
EV/Revenues
None of the above
Question 8
Fultz Enterprises and Houghlin Inc both have the same Enterprise value, EBITDA, and the same EBITDA growth expectations.
Fultz is more capital intensive than Houghlin, requiring more reinvestment to achieve the forecast growth rate. They are
otherwise identical.
Based on this information, which of the following statements is correct?
Both companies will have identical EV/EBIT multiples.
Fultz is undervalued relative to Houghlin.
Houghlin is undervalued relative to Fultz.
 Fultz will have a lower EBIT multiple than Houghlin.
Fultz and Houghlin are properly valued relative to one another on an EV/EBITDA basis.

Question 9
Johnson Pharmaceutics and Pincer Scientific are two companies whose operations are identical in every way. However, Johnson
Pharmaceuticals carries far more debt than Pincer does (though assume the weighted average costs of capital for both
companies are identical). Assuming the market is valuing both companies correctly, which of the following statements is
INCORRECT:
P/E is a preferable multiple to EV/EBIT for comparing these two companies.
Both companies will have an identical EV/EBITDA multiple.
Johnson will likely have a different PE multiple than Pincer.
Both companies will have an identical enterprise value.
Both companies will have identical returns on invested capital.

Question 10
Company A shares are currently trading at $50 per share. A survey of Wall Street analysts reveals that EPS expectations for
Company A for the full year 2014 are $2.50 per share. Company A has 300 million diluted shares outstanding. Company A’s major
competitors are trading at an average share price / 2014 Expected EPS of 23.0x.
Using the comparable company analysis valuation method, Company A shares are currently:
Undervalued by $7.50 per share
Overvalued by $7.50 per share
Overvalued by $2.50 per share
Appropriately priced
Need more information

Question 11
Net debt equals:
 Total debt - (cash and cash equivalents)
Total debt + interest expense - (cash and cash equivalents)
Total debt - (interest income + cash and cash equivalents)
Total debt + minority interest + preferred stock + capitalized leases - (cash and cash equivalents)
Total debt + minority interest + preferred stock + capitalized leases - (cash and cash equivalents + operating leases)
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Question 12
Which of the methods below IS NOT a good source to find Comparable companies?
Equity Research
10-K Competition Section
10-K Management Discussion & Analysis section
 A Fairness Opinion for an Industry Peer
Capital IQ

Question 13
When calculating Normalized EBITDA from GAAP Earnings Before Interest and Tax, you would typically include adjustments for
which of the following expenses?
1. Research and development costs
2. Restructuring Charges
3. Litigation Settlements
4. Interest income
5. Gain on sale of facilities
 1 and 2 only
2 and 3 only
1, 2 and 5
2, 3, and 4
2, 3, and 5

Question 14
The next three questions use data from GAP’s 2016 10-k, which can be viewed by clicking here.
What is the incremental dilution from the conversion of options using the Treasury stock method?
Assume a current stock price of $40.05 and perform the Treasury method calculation on each tier of Options.
Hint: you can search “Exercisable” to more quickly find the relevant information.
55,829
317,726
339,410
 1,469,830
1,852,420

Question 15
This question uses the same data as the previous question.
What is Adjusted EBITDA for Fiscal Year 2016?
Hint: Remember to add back all D&A, Share-based compensation expenses, and Impairment charges.
1,798
1,905
1,909
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1,976
2,038
Question 16
This question uses the same data as the previous question.
You are comparing Gap to a competitor which has a fiscal year ending 12/31/2016.
As you calculate an EV / LTM EBIT multiple for all the companies in the industry, what is the value of the denominator that you
would use for Gap as you calendarize Gap’s fiscal year to match its competitor?
Hint: Note GAP’s 2016 fiscal year ended on 1/28/2017.
1,191
1,216
 1,274
1,499
1524

Question 17
Which of the following items are normally included in a Company’s Diluted Share count while doing a Trading Comparables
analysis?
1. Shares from Convertible Debt, but only if they are also counted as Net Debt
2. Shares from all Share classes which are increased by their votes per share (i.e. a 10-vote share equates to 10 shares)
3. Unvested Restricted Shares
4. Additional shares from a stock split
5. Net additional shares from in-the-money options, but only if they are exercisable
1 and 2
2 and 3
4 and 5
 1, 2, and 4
3, 4, and 5

Question 18
The next three question use data from the BMC 3/31/2013 10-K, which can be viewed by clicking here. 
You are doing a Comparable Companies analysis for BMC. After the Company issued its 10-K, the Company announced it is
issuing new stock to fully repay its outstanding Term Loan. Ignoring transaction fees, what is the Company’s Pro Forma Net Debt?
Hint: View the “Long-Term Borrowings” section of the 10-K to help you quickly find the relevant information.
-48.7
 -179.9
-379.9
1,130.5
1,330.5

Question 19
This question uses the same data from the previous question.
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Using a hypothetical Enterprise value of $8 billion and just Basic Shares outstanding, what is the implied Stock price for BMC?
Hint: Use the Long-term Borrowings amount on the Balance Sheet for Debt.
46.49
53.65
 56.99
57.48
66.55
Question 20
This question uses the same data from the previous question.
What is BMC’s estimated diluted shares outstanding using a current share price of $45.42?
Hint: Search “Exercisable” to quickly find the relevant data.
140.7
142.9
144.0
145.1
147.3

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