Try the example first. The default inputs are fictional practice values. Edit any input to recalculate automatically. Use Load example or Reset to return to the practice values.
Work backward from a current share price to estimate the constant FCFF growth rate the market price implies. Calculations run only in your browser; your inputs are not sent to Stock Metric Lab.
Market-implied assumption
Implied annual FCFF growth
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An implied growth rate describes what must be true in this simplified model; it does not predict actual growth.
Result links store assumptions only after the # symbol, so they are not sent to our server. Anyone with the link can view them.
Implied forecast
| Year | Implied FCFF | Present value |
|---|
Implied-growth sensitivity
Each cell shows the annual FCFF growth rate required at that WACC and terminal-growth combination.
What reverse DCF tells you
A reverse DCF begins with the market capitalization implied by share price and diluted shares. After adjusting for cash and debt, it solves for the explicit-period FCFF growth rate that makes the model’s enterprise value equal the market-implied enterprise value.
Target enterprise value = Share price × diluted shares − cash + debt
The calculator searches for one constant annual FCFF growth rate between −50% and 100%. If the price cannot be matched within that range, it reports that no solution was found instead of extrapolating an extreme answer.
Use the result as an expectations test, then enter your own assumptions in the standard DCF Calculator. For definitions and limitations, read the DCF valuation guide, FCFF guide, enterprise value guide, and ROIC versus WACC guide.
Where to find the inputs
- Share price: Use a current market quote and record its date and time. For historical analysis, match the price date to information that was then available.
- Diluted shares: Check the EPS note and the latest outstanding-share disclosure. Adjust for material options, restricted stock, convertibles, issuances, or repurchases after the reporting period.
- FCFF: Build a normalized annual figure from the income statement, cash-flow statement, and notes in the latest 10-K or 10-Q. Keep the cash flow before debt payments because this model discounts it at WACC.
- Cash and debt: Reconcile balance-sheet amounts with the debt, lease, pension, and noncontrolling-interest notes. Apply the same enterprise-value definition used in your forward DCF.
Important limitations
- A constant growth rate is a simplified expectation, not a forecast of annual results.
- The inferred rate changes materially with WACC, terminal growth, normalized FCFF, cash, debt, and diluted shares.
- Negative or unsustainably low current FCFF requires a more detailed path-to-normal model.
- Use current primary-source filings and consistent units.
Disclaimer
This calculator is for educational and informational purposes only and does not constitute investment, financial, tax, legal, or accounting advice, a recommendation, or an offer to buy or sell any security. Implied growth is a mathematical output from user-supplied price and assumptions—not a forecast, consensus estimate, expected return, or fair value. Results may differ materially from actual outcomes. Stock Metric Lab is not affiliated with any issuer entered by a user. Verify source data independently and consult a qualified professional before making investment decisions.
Reverse DCF example: what growth does a $200.14 share price imply?
All figures below are fictional practice inputs, not company data. Select Load example to reproduce them. The calculator stores the example share price as $200.142857; $200.14 is its rounded display here.
Use annual starting FCFF of $100 million, 10 million diluted shares, $50 million cash, $20 million debt, a five-year forecast, 10% WACC and 3% terminal growth. Enter 100, 10, 50 and 20 respectively when using millions; share price remains dollars per share.
- Convert price to enterprise value. Price multiplied by shares gives approximately $2,001.43 million of equity value. Subtract $50 million cash and add $20 million debt to obtain $1,971.43 million.
- Solve for growth. Approximately 10.0% annual FCFF growth makes the model match that enterprise value. FCFF rises from $100 million today to $110 million in year 1 and $161.05 million in year 5.
- Check what drives the result. Discounted terminal value contributes approximately $1,471.43 million, or 74.6% of enterprise value. The answer therefore depends heavily on assumptions beyond year 5.
Why changing WACC changes implied growth
Holding the price and all other inputs constant:
- 9% WACC requires approximately 6.2% annual FCFF growth.
- 10% WACC requires approximately 10.0%.
- 11% WACC requires approximately 13.5%.
A higher discount rate requires more growth to support the same price. These are conditional model outputs, not forecasts or evidence that a stock is cheap.
Next, connect the assumptions to a business. Read the Microsoft analysis and ask how cloud growth, capital spending, and reinvestment could affect future cash flow. The practice inputs above are fictional, not Microsoft data.
Test your own growth assumptions in the free DCF Calculator. If you want to retain previous and current Bear, Base and Bull valuation cases, the optional DCF Comparison Workbook provides a manual comparison record. It is a forward scenario workbook, not a reverse-DCF solver.