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Reverse DCF calculator

Instead of guessing growth to get a value, start from the price and solve for the growth it implies. The calculator finds the annual revenue growth that makes a DCF equal today’s share price, given a free cash flow margin and a discount rate.

Your assumptions
Diluted, in the same unit as revenue.
Debt minus cash. Negative if the company has net cash.
Same unit as net debt and shares.
To compare with what the price implies.
Result
Revenue growth the price implies
10.4%
per year for 5 years, then 2.5% forever, at a 15.0% free cash flow margin
Revenue implied in year 51,640
Implied growth by margin and discount rate
Rows: free cash flow margin. Columns: discount rate. The highlighted cell is your base case.
8.0%9.0%10.0%
10.0%16.1%20.6%24.7%
15.0%6.3%10.4%14.1%
20.0%−0.2%3.5%7.0%

The starting values describe a fictitious company. Replace them with your own; nothing you type leaves your browser.

Why work backwards?

A classic DCF asks you to forecast growth, which is the hardest input to know. A reverse DCF turns the question around: the price is known, so what must happen for it to be fair? Michael Mauboussin and Alfred Rappaport made the approach popular in Expectations Investing (2001): rather than predicting, you judge whether the expectations already in the price are reasonable.

With the starting values (a fictitious company with revenue of 1,000, a 15% free cash flow margin, net debt of 300, 100 shares and a 9% discount rate), a price of 30 implies revenue growth of about 10% a year for five years.

How the calculator works

It runs the same DCF as the DCF calculator — free cash flow as a constant share of revenue, discounted at your rate, plus a terminal value — and searches for the revenue growth that makes the value per share equal the price, to within a millionth.

Find g such that: DCF value per share (revenue growing at g for N years) = share price

Reading the result

  • Compare the implied growth with the company’s growth over the last five to ten years, and with analysts’ forecasts.
  • Compare the implied revenue in the final year with the size of the market the company serves.
  • Look at the grid: if the implied growth changes a lot with the margin, the price is really a bet on profitability, not on growth.
  • A high implied growth does not mean the price is wrong, only that it already counts on a lot going right; a low one, that it counts on little.

Limits

The answer depends on the margin, the discount rate and the terminal growth you choose: a reverse DCF moves the uncertainty, it does not remove it. It also assumes a constant margin and steady growth, where real companies go through cycles. And it says nothing about whether the company can actually deliver the growth.

In InvestIQ

The valuation module of InvestIQ’s Stock Analysis runs a reverse DCF on every company it covers and sets the implied growth against consensus forecasts, using the same discounting code as this calculator. The rules of the engine are in the methodology.

Questions

What is a reverse DCF?

A DCF run backwards: instead of estimating growth to find a value, you start from the share price and solve for the growth that justifies it.

Why use a reverse DCF rather than a DCF?

Because growth is the hardest input to forecast. Judging whether the growth already priced in is reasonable is often easier than predicting it.

What if no growth explains the price?

With your margin and discount rate, the price would need growth outside −50% to +150% a year. Check the inputs: the margin may be too low, or net debt may exceed the value of the business.

Is a high implied growth a sell signal?

No. It means the price already assumes a lot of growth. Whether that is reasonable depends on the company, its market and its history — and the decision remains yours.

Is my data saved?

No. The calculation runs in your browser; nothing you enter is sent or stored.

Run it on a real company.

InvestIQ’s Stock Analysis runs the same DCF with consensus forecasts and the company’s own accounts, plus scenarios and a reverse DCF.

Educational tool. The result depends entirely on your assumptions. Not investment advice.