No. of Recommendations: 0
To value a stock using the nonconstant growth model, one needs to know the growth rates for earnings and dividends for varying periods in the future. I typically only see one number for long term growth rate on the web sites. For a new company, this rate should start out high and eventually stablize as the company matures. Where is that information available so as to be able to apply the model. Also, one needs the stockholders' requried rate of return for that investment. Where do you find that information? I know how to apply the model, but I don't know where to find the appropriate information. Please respond with specific locations, because I have looked at various investing web sites to no avail.

Thanks.

Tom
Print the post Back To Top
No. of Recommendations: 1
Dear thalseth,

This is a real problem; this method involves projections into the future, which are hard to do.

As far as required rate of return for the firm, the EVA formulation says that for the firm it is the WACC (and you can calculate the return for equity holders presumably). I think that plugging in what you require for your investment (say 15%) is fine as a good first estimate.

Lleweilun Smith
Print the post Back To Top