Valuation Mistakes in Job Interviews (And How to Avoid Them)

Why Understanding Valuation Mistakes in Job Interviews Matters

Valuation case studies can make or break a job interview, especially for highly competitive roles in investment banking, equity research, and private equity. Miscalculate enterprise value or apply the wrong multiple, and you risk looking unprepared in front of hiring managers. Let’s make sure that doesn’t happen.

This guide breaks down common valuation mistakes that candidates make in job interviews. You’ll learn how to avoid these pitfalls and demonstrate your analytical skills to hiring managers. By the end, you’ll be better prepared to tackle valuation questions in interviews — and land the job you want.

5 Common Valuation Mistakes in Job Interviews (And How to Avoid Them)

Mistake 1: Misjudging Peer Groups in Comparable Analysis

Comparable company analysis is a widely used valuation method in finance, but choosing the wrong peer group can distort valuation multiples. Sometimes candidates rush this step, failing to consider whether selected companies are truly comparable. This error can lead to overvaluing or undervaluing the target company. 

Example of This Mistake

Imagine you’re valuing TechCorp, a high-growth SaaS company with a 40% EBITDA margin and 30% annual revenue growth. You mistakenly compare it to ManufactureCo, a capital-intensive manufacturing firm with a 15% EBITDA margin and 5% revenue growth. 

Since TechCorp operates in a completely different industry with higher margins and growth potential, using ManufactureCo as a comparable company results in a significant undervaluation of TechCorp.

How to Avoid It:

• Ensure industry and financial comparability — TechCorp should be compared to other SaaS firms, not manufacturers.
• Align key financial metrics like growth rate, capital structure, and profitability to avoid misleading comparisons.
• Cross-check valuation multiples across different peer groups to ensure consistency.

Even with the right peer group, your valuation is only as good as your inputs. The next challenge? Calculating EBITDA correctly to maintain consistency across companies.

Mistake 2: EBITDA Calculation Errors

Miscalculating or improperly adjusting EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) skews valuation multiples like Enterprise Value to EBITDA (EV/EBITDA). Sometimes candidates make adjustment errors, leading to incorrect valuations.

Example of This Mistake

Suppose RetailCorp reported an EBITDA of $100 million, but this figure includes a one-time $10 million legal expense and $5 million in gains from selling old equipment. If you don’t adjust for these non-recurring items, you understate RetailCorp’s true EBITDA, leading to a higher EV/EBITDA multiple than its industry peers.

How to Avoid It:

• Adjust for one-time expenses and non-operating income to get normalized EBITDA.
• Use LTM (Last Twelve Months) EBITDA if forecast numbers are unavailable.
• Verify adjustments in financial statements to ensure EBITDA reflects core business earnings.

Accurately calculating EBITDA is essential, but a complete valuation also requires determining EV. 

Mistake 3: Enterprise Value (EV) Miscalculations

Enterprise Value (EV) represents a company’s total value, including debt and equity. Miscalculations lead to inconsistent valuation multiples, making cross-company comparisons misleading.

Example of This Mistake

A job candidate values AutoCorp using the following inputs:

• Market Cap: $500 million
• Total Debt: $200 million
• Cash & Equivalents: $50 million

However, they incorrectly calculate EV as: EV = Market Cap + Total Debt = $700 million. 

The simple EV formula is EV = Market Capitalization + Market Value of Debt – Cash and Equivalents. The candidate failed to subtract Cash & Equivalents of $50 million, so their calculation overstates EV by $50 million. 

How to Avoid It:

• Use the correct EV formula: 
  • Simple formula: EV = Market Cap + Total Debt  – Cash & Equivalents.
  • Extended formula: EV = Market Value of Common Stock + Market Value of Preferred Stock + Market Value of Debt + Noncontrolling Interest – Cash and Equivalents – Other Non-Operating Investments.

• Double-check net debt calculations — ensure that Net Debt = Total Debt – Cash & Equivalents to avoid incorrect EV adjustments.

• Cross-reference financial statements to ensure that debt and cash values align with company filings.

Accurate enterprise value calculations are essential, but even the best formulas can be misleading if you’re relying too heavily on a single valuation method. 

Mistake 4: Overlooking the Limitations of Valuation Methods

Many candidates assume that valuation methods like comparable company analysis and precedent transactions are all they need to value a company. However, using only one valuation method often results in an incomplete picture of a company’s value.

Example of This Mistake

A candidate values BioPharma Inc. using only EV/EBITDA but ignores DCF (Discounted Cash Flow). If BioPharma is a high-growth biotech firm with negative EBITDA, EV/EBITDA is meaningless — a DCF model would provide a better valuation.

How to Avoid It:

• Use a triangulation approach, incorporating comparable trading analysis, precedent transactions, and DCF models where applicable.
• Understand the limitations of each valuation method and adjust for company-specific risks.
• Be prepared to defend why a particular method is most appropriate given the company’s financials and market conditions.

Even with accurate valuations, you need to communicate your methodology and reasoning to stand out and get the job offer. 

Mistake 5: Poorly Structured Explanations

Even if you get the valuation calculations right, you still need to communicate your reasoning and assumptions clearly. This shows hiring managers how well you can work through valuation methodologies, justify your assumptions, and clearly communicate your thinking.

Common Mistakes Candidates Make: 

• Jumping straight to the final valuation number without explaining the process.
• Failing to justify key assumptions, such as why a specific multiple was used.
• Delivering a disorganized, unclear response, making it hard for the interviewer to follow.

Example of This Mistake:

An interviewer asks, “Walk me through how you valued this company.”

A weak answer: “I used trading comps and got an EV of $650M.” 

From this answer, the interviewer knows nothing about your reasoning, why you chose an EV approach, or what steps you followed to arrive at your answer.

Here’s an example of a strong answer: “I selected SaaS companies with similar revenue growth. I adjusted EBITDA to exclude one-time expenses, then applied an EV/EBITDA multiple of 12x, yielding an EV of $650M.”

This response follows a specific structure:

1. State your valuation method.
2. Walk through key assumptions.
3. Discuss valuation range.
4. Summarize key takeaways.

By structuring your answers clearly and anticipating follow-up questions, you’ll show hiring managers that you can think like a valuation analyst.

Avoid Valuation Mistakes in Interviews and Land the Job You Want

Mastering valuation techniques will help you impress hiring managers, communicate your insights clearly, and confidently tackle complex case studies.

By refining your approach to valuation, you’ll show employers that you can analyze financial data, justify assumptions, and deliver well-structured responses — skills that set top candidates apart.

Ready to master valuation and conquer job interviews? CFI’s Investment Banking & Private Equity Modeling Specialization equips you with financial modeling and valuation techniques used by top investment banks and private equity firms. Gain critical valuation skills to thrive in high-stakes finance roles.

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