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Market-implied expectations

Reverse DCF Calculator

A reverse DCF starts with the market price and works backward. Instead of choosing a growth forecast to produce a valuation, it estimates the annual free-cash-flow growth required to justify the current enterprise value.

Interactive calculator

Reverse DCF Calculator

Enter your assumptions and select Calculate. Values stay in your browser.

Formula behind the calculator

Enterprise value = Σ FCFₜ / (1 + WACC)ᵗ + Terminal value / (1 + WACC)ⁿ

The calculator solves this equation for the annual FCF growth rate. Enterprise value is approximated as equity market value plus debt minus cash.

How to use it

  1. 1Enter the current equity market value, debt and cash to estimate enterprise value.
  2. 2Use normalized free cash flow rather than a one-off unusually high or low year.
  3. 3Set a discount rate and conservative terminal growth assumption.
  4. 4Compare the implied growth rate with the company's history and realistic industry limits.

Interpret the result

  • A modest implied rate can indicate that the market price requires only achievable execution, but it is not automatically evidence of undervaluation.
  • A very high implied rate means the current valuation depends on sustained growth. Small changes in margins, reinvestment or the discount rate can then have a large impact.
  • Run several scenarios. Reverse DCF is most useful as an expectations test, not as a single-point price target.

Go deeper

DCF model guide

Understand the standard discounted cash flow method.

DCF vs. EV/EBITDA

Compare intrinsic and relative valuation approaches.

WACC calculator

Estimate a discount rate for operating cash flows.

Frequently asked questions

What does a reverse DCF calculate?

It calculates the operating assumption—here, annual free-cash-flow growth—that makes discounted future cash flows equal the current enterprise value.

Is a lower implied growth rate always better?

No. It can imply less demanding expectations, but weak cash-flow quality, debt, cyclicality and structural decline still matter.

Why does the calculator include debt and cash?

Free cash flow to the firm supports both debt and equity holders, so it is compared with enterprise value rather than market capitalization alone.

Which discount rate should I use?

For unlevered operating free cash flow, WACC is commonly used. Test a range because the result is sensitive to this assumption.

Can implied growth be negative?

Yes. A business with strong current cash flow may justify its enterprise value even if cash flow declines during the forecast period.