Reverse DCF

A reverse DCF runs the valuation backwards: it starts from the current share price and solves for the growth rate that would make a DCF land on that price. The output is the growth the price already assumes, sometimes called implied growth, which is often easier to judge than a value.

The other inputs stay fixed, so the answer depends on them: the discount rate, the terminal growth rate and the length of the forecast. Our fair-value tool holds the assumptions you set, solves for the stage-one free cash flow growth by bisection and prints the result under REVERSE DCF.

Read the result against the company's record. If free cash flow has grown 4% a year and the price implies 9% a year for a decade, the price assumes the business changes; if the implied rate sits below the record, the price assumes a slowdown.