Fun with growth rates growth, recent, question, always, through

fishmarket

The equity section sure goes through a heck of a lot of detail on discounting stuff using growth rates:
Dividends, Free Cashflow or Residual Income.


But what growth rates to use?
Doing a recent question I was given EPS growth rate.
Now I think that EPS growth should be the same a intrinsic growth rate (bxROE) given a stable payout ratio and D/E

so my when question is:

are there any time when I must __not__ use the intrinsic growth (=bROE) or do I __always__ need to find it and use it?

Thank you

tarunajwani

Depends on the information provided. If they give you a growth rate to use, use it. If not, then find it.

NO EXCUSES

brainsX

Related question :

when is the growth rate for earnings the same as growth rate for dividends ?

chandsingh

it's pretty much universal..

or implied growth = (P * r - B * ROE)/(P-B)

comp_sci_kid

my confusion comes from one question where they gave me growth of EPS, and and also gave my the required rate of return. Funny thing was r and g were exactly the same!
"This can't be!" I thought. The denominator will be zero!

The sneaky solutions then go ahead and calculate the intrinsic g which was less than EPS g and with that calumniation the problem becomes much much easier!