Reverse DCF Calculator

Note: You can use free cash flow and market cap instead of the per-share figures.

How to use the Reverse DCF Calculator: This calculator is designed to compute the implied growth rate of free cash flows being priced in by investors based on the current share price. Here's a simple guide on how to use the reverse DCF (discounted cash flow) calculator, and if you want a more in-depth guide, click here:

• Choosing the Model:

• Select the Model Type:

  • Choose between 'Single Stage' or 'Two Stage' from the dropdown menu.

  • The single-stage model assumes constant growth.

  • The Two-stage model assumes a high growth period of 10 years.

• Entering Data:

• Input Free Cash Flow (FCF):

  • Enter the company's Free Cash Flow per share in dollars (e.g., 5.25).

  • You can use the total amount or the per-share figure.

• Input Your Required Rate of Return (also known as Discount Rate):

  • Enter your required rate of return as a percentage (e.g., for 9%, enter 9).

• For Two-Stage Model Only:

  • If you've selected the Two-stage model, enter the Terminal Growth Rate (the rate at which cash flow is expected to grow indefinitely after the first 10 years) as a percentage.

• Input Current Share Price:

  • Enter the current share price of the company in dollars (e.g., 50).

  • You can use the market cap or the per-share figure.

  • If using price per share, make sure to use free cash flow per share.

  • If using market cap, make sure to use the total free cash flow amount.

• Calculating the Result:

• Click 'Calculate':

  • Press the 'Calculate' button to compute the implied growth rate.

  • In the Single-Stage model, this will calculate the implied constant growth rate.

  • In the Two-stage model, this will calculate the implied high growth rate for the first 10 years.

• Viewing the Result:

• The calculator will display the 'Implied Growth Rate' as a percentage under the button.

• The implied growth rate of the single-stage model cannot meet or exceed the discount rate because the model does not work with zero or negative numbers:

  Current Price = FCF per Share ÷ (discount rate - growth rate).

• Recalculating:

• To perform a new calculation, simply change the inputs as needed and click 'Calculate' again.

• Tips for Accurate Results:

• Make sure all inputs are entered correctly and in the proper format (dollars for FCF and Current Share Price, percentages for growth, and discount rates).

• Use realistic and research-based figures for more accurate and meaningful results.

• The Two-stage model assumes a high growth period of 10 years before transitioning to the terminal growth rate.