What’s Priced In? Implied Growth Calculator

How to read this number

The implied growth rate is the annual growth in earnings or free cash flow that today's price already assumes, given your discount rate and exit multiple. It isn't a prediction — it's what has to be true for the current price to be fair. A high implied growth rate means more of the good news is already priced in, so there's less room for error if growth disappoints. The scenario table then shows what happens to fair value if growth comes in a few points below that bar.

Formula & assumptions

Worked example

Using the calculator's default inputs — price $180, starting FCF/share $6.50, a 10-year growth period, a 9% discount rate, and a 15x exit multiple:

At $180, the market is already paying for roughly 10.4% annual growth for a decade. A relatively modest 3-to-5 point miss on that growth rate — not a collapse, just coming in below plan — implies 20-31% less fair value at the same discount rate and exit multiple.

Common mistakes

• Treating the implied growth rate as a forecast. It's not a prediction of what will happen — it's what the current price requires to happen. Those are different questions.
• Ignoring how sensitive the answer is to the exit multiple. A lower exit multiple assumption raises the implied growth rate needed to justify today's price, and vice versa — small multiple changes move the answer a lot over a 10-year horizon.
• Using a discount rate that doesn't match the actual risk. A low discount rate on a volatile, unproven business understates how much growth the price is really demanding.
• Stopping at the base case. The scenario table exists because the interesting question isn't "what's priced in" alone, but what happens to fair value if growth falls even modestly short.

Common questions

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