Inputs
All currency units are per share
Results
$3.00
E₁
$30.00
No‑Growth Value (E₁ / r)
$20.00
PVGO (P₀ − E₁/r)
40.00%
PVGO as % of Price
The bar decomposes price into no‑growth value and the present value of growth opportunities.
Example Data
| Symbol | P₀ | E₁ | r (%) | E₁/r | PVGO | PVGO % |
|---|---|---|---|---|---|---|
| ACME | 50 | 3.00 | 10 | |||
| BRAVO | 80 | 5.60 | 9 | |||
| CHARLIE | 35 | 2.10 | 12 | |||
| DELTA | 120 | 9.60 | 8 | |||
| ECHO | 18 | 1.00 | 11 |
Formula Used
We decompose price into a no‑growth perpetuity and the remainder:
\\[ P_0 = \\frac{E_1}{r} + \\text{PVGO} \\quad \\Rightarrow \\quad \\text{PVGO} = P_0 - \\frac{E_1}{r}. \\]
Where:
- E₁ is next‑period earnings per share. If you input E₀ and growth g, we set \\(E_1 = E_0 (1+g)\\).
- Alternatively, with return on equity ROE and retention b, \\( g = ROE \\times b \\) and \\( E_1 = E_0 (1+g) \\).
- r is the required return (cost of equity).
Interpretation: a higher PVGO means more of price reflects growth opportunities beyond a no‑growth perpetuity of earnings.