The most common Series 79 sticking points that we see from our students can sometimes make or break passing the exam. Unsurprisingly, many people share the same sticking points. In today’s post, we share where you should focus your attention based off of these points and feedback we get from students.
Series 79 Sticking Points
On the Series 79 exam, there are a few areas we hear about constantly:
- Valuation
- Tender offers
- Fairness opinions
- Equity research rules
- Regulation M
Not only do we hear about these from student feedback, but we often get asked about these areas from student students studying for the exam.
Valuation: The Most Common Issue
The evaluation section tends to be the most difficult for people. You’ll have to understand the difference between precedent, transaction, evaluations, and comparable company analysis for starters. The easiest way to really differentiate. These is in the wording. The transaction evaluations are typically for transactions such as mergers and acquisitions.
Comparable company analysis on the other hand is in comparing the valuations of companies that are already public. Furthermore, the exam also indicates that you cannot do comparable company analysis for private companies.
Understanding the evaluation ratios would be the next step. Be sure to understand the various evaluation metrics that can be used such as:
- EV/Sales or P/Sales
- EV/EBITDA
- EV/EBIT
- P/E
- PEG
Most of the above will be tested, most likely. Keep in mind however they may not always be quantitative questions, but maybe asked qualitatively. Knowing the ratios in their inputs will help you understand conceptual questions.
For example, they may ask how a share buyback might impact the P/E ratio. Since the buyback will reduce shares outstanding, and therefore increase the earnings per share, we would assume that all else equal, the PE ratio would actually decrease. That’s because we’re assuming the price stays constant, but the earnings per share would increase.
Overall, make sure to stick to these core focus areas at first to gain proficiency. Beyond that you’ll have to fill in gaps here and there based off of the scores of your practice exams. If you need any help, feel free to reach out to a Series 79 tutor! Good luck!