scarecrow

You can also look at it as the amount of a stock's price (if expressed on a per share basis) that represents future business expansion. It's most useful for figuring out how much growth is implied by the stock price, and whether that growth seems reasonable or not. It's also useful when comparing two companies to see if the growth prospects of one are radically larger or smaller than the other (and of course trying to figure out if that is a reasonable difference).

I think the L2 material can also do the PVGO calculation in a P/E form, which can break down the PE into a portion that represents existing business and a portion representing future growth prospects. Often this is more comparable between companies.

The CFA seems to emphasize the calculation more than the use, if I recall, but it helps to know how it's used.