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Reverse DCF Implied Growth Calculator

Solve for the free-cash-flow growth implied by a market valuation.
Implied annual FCF growth
7.15%
Starting FCF yield
5.00%
Year-10 FCF
$99,762,096

The implied growth rate is the expectation required by this simplified model. Change the discount or terminal-growth assumptions to see how fragile that expectation is.

A reverse discounted-cash-flow model asks what must happen for today’s valuation to make sense. Enter market capitalization, starting free cash flow, forecast period, discount rate, and terminal growth. The solver estimates the constant annual free-cash-flow growth embedded in those assumptions instead of presenting a false-precision price target.

Formula reviewed 2026-08-021 primary sourceMethodology and disclosures →

How this reverse dcf implied growth calculator works

The calculator projects free cash flow at one constant growth rate, discounts each annual amount, adds a Gordon-growth terminal value, and uses a numerical search to match the entered market capitalization.

Formula

Market value = Σ FCFₜ ÷ (1 + discount rate)ᵗ + terminal value ÷ (1 + discount rate)ⁿ

A complete valuation may require enterprise value, net debt, dilution, cyclicality, working capital, and changing margins. This model is an expectations diagnostic, not a fair-value opinion.

Primary specifications

Before you use the result

Assumptions

  • • Free cash flow grows at one constant rate during the explicit period.
  • • Discount rate exceeds terminal growth.
  • • Market capitalization is used instead of enterprise value, so financing claims must be considered separately.

Quick start

  1. 1. Use normalized free cash flow from source filings.
  2. 2. Test several defensible discount and terminal-growth rates.
  3. 3. Compare implied growth with addressable market, margins, reinvestment needs, and competition.

Frequently asked questions

Why use a reverse DCF?

It makes the market’s embedded expectations explicit, letting an investor test whether the required growth appears plausible.

Is implied growth a forecast?

No. It is the constant growth rate that reconciles the entered assumptions with the entered market value.

Should I use market cap or enterprise value?

Enterprise-value models generally pair with cash flow before debt claims. This simplified equity model uses market cap and free cash flow to equity; keep the definitions consistent.

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Go deeper

Investing glossaryUnderstand the conceptsStock researchApply it to real names

The market is pricing an expectation. Is it credible?

Yield Theory connects valuation hurdles to filings, capital flows, competitive evidence, and written thesis breakpoints.

Read the source-linked thesis →

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