Free Reverse DCF Calculator
Work backwards from the current share price to the growth rate the market is pricing in. Enter the price and your assumptions and the calculator solves for implied growth.
To justify today's price, the business has to grow free cash flow about 7.7% a year for a decade. Compare that to its actual history.
What a reverse DCF tells you
A normal DCF asks you to forecast growth and hands you a value. A reverse DCF turns that around. It takes the current share price as settled and solves for the one number that would justify it: the rate at which free cash flow has to grow. You stop guessing the future and start judging an expectation the market has already set.
This calculator holds your discount rate, terminal growth, and buyback assumptions fixed, then searches for the uniform annual growth over the next decade that makes the model equal the price. The answer is a single figure you can check against reality.
How to use this calculator
- Enter the current share price.
- Enter free cash flow per share, the same figure you would use in a forward DCF.
- Set your discount rate and a conservative terminal growth rate.
- Read the implied growth rate, then compare it to the company's actual history and its realistic prospects.
Reading the result
Suppose the price implies 18 percent annual growth for ten years. If the company has compounded free cash flow at 6 percent and operates in a mature market, the price is asking for a lot, and the burden is on you to explain why it can deliver. If the implied figure sits below the company's steady record, the market may be offering it cheaply. When the implied growth runs to the top of the range, the calculator marks it as priced for perfection: the price already assumes an excellent outcome with little margin for error.
Assumptions and limits
The solver needs a price and free cash flow above zero, and a discount rate above the terminal growth rate. It applies one growth rate across the whole decade, so it answers a clean question rather than modelling every twist of a business. Use it as a reality check on price, paired with what you know about the company.
Frequently asked questions
- What is a reverse DCF?
- A reverse DCF flips a normal discounted cash flow around. Instead of guessing a growth rate to produce a value, you take the current market price as given and solve for the growth rate that justifies it. The output is a single number: the growth the market is pricing in.
- Why use a reverse DCF instead of a forward DCF?
- A forward DCF asks you to predict the future, which is hard and easy to fudge. A reverse DCF asks an easier question: is the growth baked into today's price reasonable given what this business has actually done? You judge an expectation instead of inventing one.
- How do I read the implied growth figure?
- Compare it to the company's track record and what you know about its industry. If the price implies 20 percent annual growth for a decade and the business has grown 6 percent a year, the price is demanding a lot. If the implied growth sits below the company's steady history, the market may be cautious.
- What does 'priced for perfection' mean?
- When the implied growth runs very high, the price already assumes an outstanding outcome. There is little room left for error, and any stumble can hurt. The calculator flags this when the solved growth reaches the top of its range.
This calculator is for education and research only. It is not investment advice and it does not recommend buying or selling any security. The output depends entirely on the assumptions you enter.