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Variant Views and Market Expectations

Infer expectations from prices, isolate your variant view, and identify evidence that could change it.

These prompts are original practice. They are not questions from a named employer or a live hiring loop.

Renewal repricing

Northglass trades at $54. Next-year consensus EPS is $3.00. Your comparison multiple is 18×. A renewal price hike lifts fee per retained account from $100 to $110. There are 200,000 accounts up for renewal. Consensus assumes 92% retention. Your case assumes 87%. Incremental revenue flows through at 60% pretax. Tax is 25% and diluted shares are 5 million.

  1. 1.What EPS does the price imply at the comparison multiple?

  2. 2.What renewal revenue does consensus assume?

  3. 3.What renewal revenue does your case assume?

  4. 4.What is the EPS difference caused by retention?

  5. 5.What price follows at 18× with all other EPS drivers at consensus?

  6. 6.Retention without repricing would be 95%. What new retention rate preserves the old revenue?

  7. 7.Which observation tests your lower retention estimate directly?

  8. 8.Early renewals skew toward customers who signed multiyear contracts. What is the concern?

  9. 9.What would invalidate a bear case based only on retention?

  10. 10.What else could reconcile $54 with your lower EPS?

Capital spending

Fen Ferry has enterprise value of $960m. Assume steady annual unlevered free cash flow starting next year, zero growth, and a 10% discount rate. Normal operating cash flow before capital spending is $150m. Your annual capex estimate is $65m. Consensus uses $54m. All figures are in millions.

  1. 11.What annual free cash flow does the price imply?

  2. 12.What capex does the price imply under the operating cash flow assumption?

  3. 13.What EV follows from your capex forecast at 10%?

  4. 14.How much EV does one additional million of recurring annual capex remove at 10%?

  5. 15.At 9%, what free cash flow does the same price imply?

  6. 16.What operating cash flow would support the current EV at 10% and your capex?

  7. 17.Which evidence most directly tests maintenance needs?

  8. 18.A new terminal project costs $30m once. Where should it go?

  9. 19.Management raises EBITDA guidance but leaves capex outlook vague. What should your note ask?

  10. 20.What makes the implied capex estimate conditional?

New-store returns

Larch Home trades at $42. Standalone stores are worth $34 per share in your model. A fully successful expansion adds $20 per share and failure adds zero. Your success probability is 55%. The expansion's first cohort has 12 stores. The plan requires $2m annual contribution per mature store.

  1. 21.What success probability does $42 imply under these values?

  2. 22.What is your probability-weighted share value?

  3. 23.If failure costs $4 per share and success still adds $20, what probability is implied by $42?

  4. 24.What mature annual contribution does the cohort need in total?

  5. 25.The cohort earns $18m at maturity. What is the average contribution per store?

  6. 26.Why compare stores at the same age?

  7. 27.Sales rise after openings but nearby stores lose traffic. What matters for valuation?

  8. 28.The strongest cohort opened in unusually cheap locations. What should expansion forecasts test?

  9. 29.What catalyst most directly narrows uncertainty about mature contribution?

  10. 30.The market reprices to $45 before that disclosure. What happened to your estimated upside?

Bank profitability

Hearth Bank trades at 1.2× tangible book. Assume a steady ROE on tangible equity, 4% perpetual growth, and 10% cost of equity. Use justified price to book = (ROE − growth) ÷ (cost of equity − growth). Your steady ROE is 10.6%.

  1. 31.What ROE is implied at 1.2× book?

  2. 32.What price-to-book multiple does your ROE imply?

  3. 33.At a 9% cost of equity, what ROE supports 1.2×?

  4. 34.If cost of equity rises to 11%, what multiple follows at your ROE?

  5. 35.What happens to the justified multiple if ROE equals the cost of equity?

  6. 36.A deposit-rate increase drives your lower forecast. What evidence would challenge it?

  7. 37.Loan losses improve for one quarter because of a reserve release. What should you test before revising steady ROE?

  8. 38.Why monitor deposit mix even with unchanged posted rates?

  9. 39.Which input can explain the gap without any ROE disagreement?

  10. 40.What should the thesis identify as its next test?

Industrial volume

Beacon Gears has $400m of revenue and a 15% operating margin. The price is consistent with next-year EBIT of $72m at the chosen multiple. Consensus assumes $450m revenue. You forecast $440m of sales at 15% margin.

  1. 41.What margin does $72m EBIT require on consensus sales?

  2. 42.What EBIT is in your forecast?

  3. 43.How much higher is implied EBIT than your estimate?

  4. 44.What margin on your revenue would reach implied EBIT?

  5. 45.At your margin, how much revenue would reach $72m?

  6. 46.At consensus revenue with your margin, what EBIT follows?

  7. 47.Orders are up but delivery capacity is unchanged. What determines sales timing?

  8. 48.Overtime increases when the factory is full. What does that challenge?

  9. 49.A competitor cuts prices. Which evidence tests the effect on Beacon?

  10. 50.How should a memo distinguish a high EBIT hurdle from a short thesis?

Subscription platform

Pine Ledger has 100,000 annual contracts at $1,000 each. Next year 80,000 contracts are eligible to renew. Of those, consensus expects 90% renewal and your view is 85%. Another 20,000 remain on contract. Both models assume 15,000 new customers at the same price. Use end-year annual recurring revenue.

  1. 51.How many accounts does consensus expect at year-end?

  2. 52.What is your implied annual recurring revenue?

  3. 53.How much incremental new business would close the ARR gap at $1,000 each?

  4. 54.What renewal rate would imply 105,000 total accounts at the stated new-business assumption?

  5. 55.How should ARR be compared with next year's recognized sales?

  6. 56.A renewal discount preserves customer count. What does the analyst need to monitor too?

  7. 57.The company shifts to three-year prepaid contracts. Which figure can rise before recognized revenue?

  8. 58.What would make rising new sales fail to validate the bull thesis?

  9. 59.Which public update best separates retention from acquisition?

  10. 60.If every forecast except retention matches consensus, how should the variant view be stated?

Project approvals

Juniper Grid trades at $30. The core business is worth $24. Project A contributes $10 per share if approved and zero otherwise. Project B contributes $5 if approved and zero otherwise. Assume additive values and B approval probability of 40%.

  1. 61.What A approval probability is implied by the price?

  2. 62.What is your value if A approval probability is 65%?

  3. 63.If the core value falls to $22, what A probability now supports $30?

  4. 64.What value follows if A is denied and B odds remain 40%?

  5. 65.If project A approval arrives but opening is delayed, which assumption changes first?

  6. 66.How can A's approval affect B without invalidating the method?

  7. 67.Which fact tests a forecast of imminent A approval?

  8. 68.How does a requirement for new equity funding affect a per-share model?

  9. 69.Approval arrives exactly as widely expected. Why might the price barely move?

  10. 70.What alternative should the note disclose when inferring A odds?

Margin recovery

Mallow Foods sells $500m annually at 28% gross margin. Its valuation requires $155m gross profit under your bridge. Consensus assumes a 30% margin. You expect a new sourcing agreement to save $9m, offset by $4m of freight increases. Sales are held flat.

  1. 71.What gross margin supports the price under the bridge?

  2. 72.What gross profit does consensus project?

  3. 73.What gross profit does your sourcing and freight forecast produce?

  4. 74.What is the margin in your case?

  5. 75.What additional improvement would reach the price-implied profit from your case?

  6. 76.If annual freight cost stays flat, what gross profit follows from sourcing alone?

  7. 77.A supplier rebate applies only to the first order. How should it enter steady margin?

  8. 78.Which release tests whether gross margin improved on the modeled drivers?

  9. 79.Sales shift toward lower-margin products. What should be modeled?

  10. 80.Why can better gross profit fail to lift the stock?

Buybacks and valuation

Weld Market earns $120m on 60m shares. Its stock trades at $36, and the comparison multiple is 16×. Management proposes buying 5m shares at the beginning of next year. Ignore financing effects for the initial calculation.

  1. 81.What EPS does $36 imply at 16×?

  2. 82.What EPS follows from the buyback alone?

  3. 83.What net income would meet implied EPS after the buyback?

  4. 84.What multiple does the stock trade at on buyback-adjusted EPS?

  5. 85.How much cash would the buyback use if executed at $36 throughout?

  6. 86.What additional EPS effect could debt funding create?

  7. 87.The company only authorizes the repurchase. What evidence confirms it affects weighted shares?

  8. 88.What part of the EPS lift represents operating improvement in the initial calculation?

  9. 89.If the repurchase is delayed to the exact midpoint of the year, what weighted shares result?

  10. 90.What should a note say about a headline EPS beat driven by the buyback?

Cash runway and optionality

Orchid Robotics trades at $18 with 20m shares and $80m net cash. The operating business burns $20m in year one. Assume no other cash flows or share changes in year one. The analyst values the business at $300m today before adding today's net cash.

  1. 91.What equity value does the share price imply?

  2. 92.What operating enterprise value is implied by today's price?

  3. 93.What is your value per share on the stated basis?

  4. 94.What net cash remains after year one if the burn occurs?

  5. 95.At a constant $20m annual burn, what simple runway does today's net cash represent?

  6. 96.What happens if burn is already in the operating DCF and you subtract it again from today's cash?

  7. 97.Which milestone best tests whether burn falls next year?

  8. 98.A convertible issue funds the runway. What belongs in scenarios?

  9. 99.What assumption most threatens the valuation if commercialization slips?

  10. 100.The equity rallies to $21 without new operating evidence. What should the memo update?

Implied growth

Elm Tools trades at enterprise value of $720m. Next-year unlevered free cash flow is $36m. Use EV = next-year cash flow ÷ (discount rate − perpetual growth). The discount rate is 9% in both cases and your growth estimate is 3%.

  1. 101.What perpetual growth rate does the price imply?

  2. 102.What EV does your growth estimate imply?

  3. 103.What next-year cash flow supports $720m at your growth rate?

  4. 104.What discount rate supports $720m if growth is 3%?

  5. 105.How much lower is your EV than the market EV as a percentage of market EV?

  6. 106.If the forecast uses 9% growth with a 9% discount rate, what breaks?

  7. 107.What operating evidence could justify the higher growth assumption?

  8. 108.Why show a sensitivity grid rather than one implied growth rate alone?

  9. 109.A capacity expansion adds cash flow for three years. Where should it be valued?

  10. 110.Which evidence would make you revise a 3% growth view upward?

  11. 111.What should the review track after publishing the variant view?