Reverse DCF calculator
Calculate the free-cash-flow growth already priced into today’s share price. The reverse DCF calculator finds the growth rate that makes fair value equal the price.
What is a reverse DCF?
A normal DCF asks what the stock is worth if it grows at a given rate. A reverse DCF flips the question: what growth must the stock deliver for today’s price to make sense? That is the growth already priced in.
Formula
Solve for g so that 10-year DCF value = share price.
How the reverse DCF calculator works
Free cash flow per share grows for ten years at an unknown rate. After that, the calculator uses the higher of Gordon growth and the exit multiple. It searches for the rate that makes this fair value equal the price you entered.
Worked example
Price 140, free cash flow 6 per share, 9% WACC, 2.5% growth after year 10, exit multiple 18. The table below shows priced-in growth for nearby prices.
Assumptions and notes
- Growth is constant for ten years.
- Terminal value is the higher of Gordon growth and the exit multiple on free cash flow.
- If the price is far outside, no rate between −20% and 60% fits.
- The calculator is a model, not investment advice.
Samples at a 9% WACC
Growth after year 10: 2.5%. Exit multiple: 18. Horizon: 10 years.
| Price | FCF per share | Priced-in growth |
|---|---|---|
| 100.00 $ | 6.00 $ | 2.3 % |
| 140.00 $ | 6.00 $ | 6.6 % |
| 180.00 $ | 6.00 $ | 9.9 % |
| 140.00 $ | 8.00 $ | 2.9 % |
What does priced-in growth mean?
It is the free-cash-flow growth rate today’s share price already assumes. Compare it with what you think the business can actually deliver.
How is this different from the DCF calculator?
The DCF calculator takes a growth rate and returns a fair value. The reverse DCF calculator takes the price and returns the growth rate.
What is the exit multiple?
The price-to-cash-flow ratio used to value the stock after ten years. A higher multiple raises terminal value and lowers the growth the price still needs.
Is high priced-in growth bad?
It means the price already contains a lot of growth. If the business misses that, the price loses its support. If it beats it, there is still room.