Reverse DCF
Also called: market-implied growth, implied expectations
Working backwards from the current share price to find the growth, margins or returns the market must be assuming.
Instead of forecasting precisely, a reverse DCF asks whether the expectations already built into the price are plausible, by comparing them with the company's history, its industry and the returns on capital needed.
Learn more in these lessons
- Reverse DCFHow can you tell what growth a share price is already assuming?
- Case study: a valuation bubble (technology shares, 1999-2002)What does the dot-com bubble teach about paying too much for good ideas?
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