Valuation Reality Check

Ask what the price requires

This is a simplified terminal earnings scenario, not a discounted cash flow valuation. Enter today’s equity market value and annual company revenue. Revenue grows at your assumed rate; terminal revenue × net profit margin × P/E gives terminal equity value. Annual share-count growth then reduces the per-share result.

Reverse calculation: revenue required = current equity value × (1 + required return)^years × (1 + share-count growth)^years ÷ (terminal net margin × terminal P/E). The tool converts required revenue into an annual growth rate from your current revenue base.

Worked example — hypothetical

Equity value 1,000; revenue 500; five years; 15% revenue growth; 10% net margin; 20× terminal earnings; 2% annual share-count growth. The scenario yields about 1,006 of terminal revenue and a 12.75% annual share-price return. Requiring 10% a year instead implies about 889 of terminal revenue, or 12.20% annual revenue growth.

Stress the assumptions separately

Rerun with lower growth, lower margins, a smaller terminal multiple or more dilution. Compare which assumption changes the result most. A strong physical constraint can still offer a weak per-share outcome at the entry price.

The model excludes dividends, interim cash flows, taxes, foreign exchange and the path of prices between now and the terminal year. Net margins must incorporate the financing assumptions you intend to use. It does not model debt refinancing or capital needs separately. Zero or negative terminal earnings require a different valuation method.

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