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Nvidia
Implied Revenue Growth46.8%
Current Stock Price$229.28
Terminal Growth2.5%
WACC15.2%
Market-Implied Enterprise Value$5487.6B
Reverse DCF
For informational and educational purposes only • Not investment advice.
Compare implied growth across companies
Apple
Implied Revenue Growth27.2%
Current Stock Price$336.64
Terminal Growth2.5%
WACC10.4%
Market-Implied Enterprise Value$4966.3B
Alphabet
Implied Revenue Growth32.8%
Current Stock Price$351.66
Terminal Growth2.5%
WACC10.7%
Market-Implied Enterprise Value$4131.0B
Microsoft
Implied Revenue Growth29.7%
Current Stock Price$535.07
Terminal Growth2.5%
WACC10.2%
Market-Implied Enterprise Value$3954.7B
Time Horizon
Terminal Growth
Equity Risk Premium
%
Range: 2–10%
What is Reverse Discounted Cash Flow Valuation?
Reverse Discounted Cash Flow (Reverse DCF) valuation starts with the company's current stock price and works backwards to determine the Revenue Growth required to justify that price.
Unlike a Standard DCF, which estimates Fair Value from assumed future performance, Reverse DCF identifies the growth expectations implied by the current market valuation.
The result is the Implied Revenue Growth Rate—the initial Revenue Growth required for the DCF valuation to reproduce the current market price under the selected assumptions.
Reverse DCF Formulas
Reverse DCF uses the standard DCF framework, but instead of estimating a fair value, it solves for the Revenue Growth Rate that makes the calculated DCF value equal today's market price.
Enterprise Value
DCF Implied Value per Share
Reverse DCF Condition
How the Reverse DCF Valuation Works
The model repeatedly adjusts the initial Revenue Growth assumption until the calculated Enterprise Value matches the Target Enterprise Value implied by today's stock price.
Key Model Assumptions
• The current market price is treated as the value to be explained.
• Starting Revenue and Free Cash Flow use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• Revenue is projected using the implied initial Revenue Growth Rate, which gradually converges toward the Terminal Growth Rate.
• Free Cash Flow is estimated as projected Revenue multiplied by the projected Free Cash Flow Margin.
• The Free Cash Flow Margin gradually moves toward a normalized Target Free Cash Flow Margin based on the median of up to the five most recent valid historical Free Cash Flow Margins.
• Future Free Cash Flows are discounted using the Weighted Average Cost of Capital (WACC).
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• Terminal Growth represents the company's sustainable long-term growth rate after the explicit forecast period.
• The model repeatedly adjusts the initial Revenue Growth Rate until the calculated Enterprise Value matches the Enterprise Value implied by today's market price.
• Starting Revenue and Free Cash Flow use trailing twelve-month (TTM) values when available, with the latest annual values used as a fallback.
• Revenue is projected using the implied initial Revenue Growth Rate, which gradually converges toward the Terminal Growth Rate.
• Free Cash Flow is estimated as projected Revenue multiplied by the projected Free Cash Flow Margin.
• The Free Cash Flow Margin gradually moves toward a normalized Target Free Cash Flow Margin based on the median of up to the five most recent valid historical Free Cash Flow Margins.
• Future Free Cash Flows are discounted using the Weighted Average Cost of Capital (WACC).
• The Risk-Free Rate is based on the U.S. 10-Year Treasury yield published by the Federal Reserve Board.
• Terminal Growth represents the company's sustainable long-term growth rate after the explicit forecast period.
• The model repeatedly adjusts the initial Revenue Growth Rate until the calculated Enterprise Value matches the Enterprise Value implied by today's market price.
Step 1 — Calculate the Target Enterprise Value
Target Enterprise Value = Market Equity Value + Net Debt
Market Equity Value = Current Share Price × Shares Outstanding
Net Debt = Total Debt − Cash & Short-Term Investments
Reverse DCF starts with today's market price rather than estimating a Fair Value. The Current Share Price is multiplied by Shares Outstanding to determine the Market Equity Value.
Net Debt is then added to calculate the Target Enterprise Value. This is the Enterprise Value that the projected future cash flows must match.
Step 2 — Project Revenue and Free Cash Flow
Revenueₜ = Revenueₜ₋₁ × (1 + Revenue Growthₜ)
Free Cash Flow Margin = Free Cash Flow / Revenue
Free Cash Flowₜ = Projected Revenueₜ × Free Cash Flow Marginₜ
Revenue Growth is the unknown assumption that the Reverse DCF seeks to determine. Each tested initial Revenue Growth Rate creates a different projected Revenue path.
Revenue Growth gradually converges toward the Terminal Growth Rate, while the Free Cash Flow Margin moves toward a normalized Target Free Cash Flow Margin based on the median of up to the five most recent valid historical Free Cash Flow Margins.
Projected Revenue is then combined with the projected Free Cash Flow Margin to estimate future Free Cash Flows.
Step 3 — Calculate WACC and Terminal Value
WACC = Cost of Equity × Equity Weight + Cost of Debt × Debt Weight × (1 − Tax Rate)
Terminal Cash Flow = Final Projected Free Cash Flow × (1 + Terminal Growth)
Terminal Value = Terminal Cash Flow / (WACC − Terminal Growth)
WACC is used to discount future Free Cash Flows back to their present value. After the explicit forecast period, Free Cash Flow is assumed to grow at the Terminal Growth Rate.
The Gordon Growth formula converts these continuing cash flows into a Terminal Value. Both WACC and Terminal Growth therefore influence the Implied Revenue Growth produced by the Reverse DCF.
Step 4 — Calculate the Enterprise Value
Enterprise Value = PV of Forecast Cash Flows + PV of Terminal Value
PV of Forecast Cash Flows = Σ FCFₜ / (1 + WACC)t
PV of Terminal Value = Terminal Value / (1 + WACC)n
The projected Free Cash Flows and Terminal Value are discounted back to their present values using WACC. Together, they determine the Enterprise Value produced by the currently tested Revenue Growth assumption.
This calculated Enterprise Value is compared with the Target Enterprise Value derived from the current stock price in Step 1.
If the calculated Enterprise Value is below the target, the tested Revenue Growth is too low. If it is above the target, the tested Revenue Growth is too high.
Step 5 — Find the Matching Revenue Growth
Calculated EV < Target EV → Increase Revenue Growth
Calculated EV > Target EV → Decrease Revenue Growth
Binary Search = Repeatedly adjust the initial Revenue Growth assumption until Calculated EV ≈ Target EV
The model repeatedly adjusts the initial Revenue Growth assumption and recalculates the complete DCF.
A binary search progressively narrows the range of possible Revenue Growth Rates until the calculated Enterprise Value closely matches the Target Enterprise Value.
Step 6 — Determine the Implied Revenue Growth
Implied Revenue Growth = Growth Rate where Target EV ≈ Calculated EV
Target Enterprise Value ≈ Present Value of Forecast Cash Flows + Present Value of Terminal Value
Once the calculated Enterprise Value closely matches the Target Enterprise Value, the corresponding initial Revenue Growth Rate becomes the Implied Revenue Growth.
This represents the initial Revenue Growth required for the model to reproduce today's market valuation. The growth rate then gradually converges toward the Terminal Growth Rate over the forecast period.
The result depends on assumptions such as WACC, Terminal Growth, the forecast period and the projected Free Cash Flow Margin.