If a company stopped growing and paid out all its earnings, its share would be worth EPS ÷ r. Anything investors pay above that is for growth. A high PVGO share is typical of growth stocks and makes the price sensitive to growth expectations.
How to use the PVGO Calculator – Present Value of Growth Opportunities
- Earnings (net income)
- Shares outstanding
- Share price
- Cost of equity
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the earnings and number of shares (or EPS), the share price and the cost of equity.
Tips
- Use figures for the same period (a month, a quarter or a year) for every input so ratios compare like with like.
- Track the metric over time – the trend usually tells you more than a single value.
- Compare your result with industry benchmarks, which vary a lot between sectors.
- Treat the result as a starting point for a decision, then check the assumptions behind each input.
Common mistakes to avoid
- Mixing monthly and yearly numbers in the same calculation.
- Using revenue where the formula needs profit (or the other way round).
- Forgetting hidden costs such as taxes, fees, overheads or your own time.
Inputs explained
| Field | What to enter |
|---|---|
| Earnings (net income) | Amount in your currency |
| Shares outstanding | A number |
| Share price | Amount in your currency |
| Cost of equity | In % |
What each result means
- Earnings per share = [Earnings (net income)]÷[Shares outstanding]
- Value with no growth = [Earnings per share]÷([Cost of equity]÷100)
- Present value of growth opportunities = [Share price] – [Value with no growth]
- Share of price from growth = [Present value of growth opportunities]÷[Share price]×100
Example values
How the main result changes when Earnings changes and everything else stays at the example values above:
| Earnings (net income) | Present value of growth opportunities |
|---|---|
| 25,000,000 | 62.22 |
| 37,500,000 | 48.33 |
| 50,000,000 | 34.44 |
| 62,500,000 | 20.56 |
| 75,000,000 | 6.67 |
| 100,000,000 | -21.11 |
Formula
No-growth value = EPS ÷ cost of equityPVGO = share price − EPS ÷ cost of equityWorked example
Inputs — Earnings (net income): $50,000,000; Shares outstanding: 10,000,000; Share price: $90; Cost of equity: 9 %.
Results — Earnings per share = $5.00; Value with no growth = $55.56; Present value of growth opportunities = $34.44; Share of price from growth = 38.27 %.
Frequently asked questions
What does a negative PVGO mean?
The market values the company below its no-growth value – it expects earnings to fall or returns below the cost of capital.
Which companies have a high PVGO?
Fast-growing technology and biotech firms.
How do I find the cost of equity?
Use the CAPM or dividend discount model calculators.
What formula does the PVGO Calculator – Present Value of Growth Opportunities use?
No-growth value = EPS ÷ cost of equity.