---
title: "Reverse DCF — what growth rate is priced into a stock"
description: "A reverse DCF starts from the share price and solves for the growth rate the price implies. The formula, a worked example from Apple’s FY2025 10-K, and a free calculator seeded from filed statements."
canonical: https://evidinvest.com/tools/reverse-dcf
last_updated: "2026-09-10"
---

# Reverse DCF: the growth rate a share price implies

> A reverse discounted cash flow runs the ordinary DCF backwards. Instead of choosing a growth
> rate and reading off a value per share, you take the share price as given and solve for the
> growth rate that makes the model produce exactly that price. The output is an assumption, not
> a valuation and not a recommendation.
> Canonical page: https://evidinvest.com/tools/reverse-dcf.

## The formula

Enterprise value is the sum of each year’s free cash flow discounted at the required return, plus a terminal value of final-year free cash flow times one plus terminal growth, divided by the discount rate minus terminal growth, itself discounted back. Equity value is enterprise value minus net debt; value per share is equity value divided by diluted shares. A reverse DCF fixes value per share at the market price and every input except Stage 1 growth, then solves for that growth rate. Because value per share rises monotonically with Stage 1 growth whenever the discount rate exceeds terminal growth and free cash flow is positive, a bisection search converges on a single answer.

## Worked example: AAPL

Inputs as filed. Source filing, accession `0000320193-25-000079`: https://www.sec.gov/Archives/edgar/data/320193/000032019325000079/0000320193-25-000079-index.htm

| Input | Value | Where it comes from |
| --- | --- | --- |
| Cash from operations, FY2025 | $111,482M | NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure, FY2025 | $12,715M | PaymentsToAcquirePropertyPlantAndEquipment |
| Free cash flow, FY2025 (operations − capex) | $98,767M | computed from the two rows above |
| Cash, equivalents and marketable securities at 27 Sep 2025 | $132,420M | 35,934 + 18,763 current + 77,723 non-current |
| Commercial paper and term debt at 27 Sep 2025 | $98,657M | 7,979 + 12,350 current + 78,328 non-current |
| Net cash (negative net debt) | −$33,763M | computed from the two rows above |
| Diluted weighted-average shares, FY2025 | 15,004.7M | WeightedAverageNumberOfDilutedSharesOutstanding |

### Assumptions held fixed while growth is solved for

| Assumption | Value |
| --- | --- |
| Stage 1 length | 5 years |
| Stage 2 growth and length | 4% a year for 5 years |
| Terminal growth after year 10 | 2.5% a year, forever |
| Discount rate (WACC) | 8.5% |
| Share price used | $250.00 (a round illustrative number, not a quote) |

### The solved projection

| Year | Free cash flow | Present value |
| --- | --- | --- |
| 1 | $119.0B | $109.6B |
| 2 | $143.3B | $121.7B |
| 3 | $172.6B | $135.1B |
| 4 | $207.8B | $150.0B |
| 5 | $250.3B | $166.5B |
| 6–10 (4% a year) | $260.3B → $304.5B | $734.3B combined |

### How the answer moves with the discount rate

The implied growth rate is meaningless without the discount rate it was solved at. On the same filed cash flows:

| Discount rate (WACC) | Implied Stage 1 growth |
| --- | --- |
| 7.5% | 15.5% a year |
| 8.0% | 18.1% a year |
| 8.5% | 20.4% a year |
| 9.0% | 22.7% a year |
| 10.0% | 26.9% a year |

### What the company has actually filed

| Fiscal year | Free cash flow |
| --- | --- |
| FY2023 | $99,584M |
| FY2024 | $108,807M |
| FY2025 | $98,767M |

## FAQ

### What is a reverse DCF?

A reverse discounted cash flow runs the ordinary DCF backwards. Instead of choosing a growth rate and reading off a value per share, you take the share price as given and solve for the growth rate that makes the model produce exactly that price. The output is an assumption, not a valuation.

### What does a reverse DCF actually tell you?

It tells you what the market is already assuming about future cash flows, expressed as one number you can compare with what the company has filed. That turns the question from "is this the right price" into "is this the right expectation", which is a question the filings can speak to.

### What is the reverse DCF formula?

Start from the DCF identity: enterprise value equals the sum of each year’s free cash flow discounted at the required return, plus a terminal value of FCF in the final year times one plus terminal growth, divided by the discount rate minus terminal growth, itself discounted back. Equity value is enterprise value minus net debt, and value per share is equity value divided by diluted shares. A reverse DCF fixes value per share at the market price and every input except Stage 1 growth, then solves for that growth rate. Because value per share rises monotonically with Stage 1 growth whenever the discount rate exceeds terminal growth and free cash flow is positive, a bisection search converges on a single answer.

### Which numbers should come from the filings and which from you?

Free cash flow, net debt and the share count are historical facts and should be taken from the latest annual report — EvidInvest seeds them from the filed statements, with the form, period and accession number on the row. Growth, the discount rate, the fade and terminal growth are judgments and stay yours.

### Why does the implied growth rate change when I change the discount rate?

Because they push in opposite directions. A higher discount rate lowers the present value of every future cash flow, so more growth is needed to reach the same price. In the Apple example, moving the discount rate from 7.5% to 10% moves the implied Stage 1 growth from about 15.5% a year to about 26.9% a year on the same filed cash flows. Always state the discount rate alongside any implied growth figure; on its own it means very little.

### Does a high implied growth rate mean a stock is overpriced?

No. It means the price embeds that rate of growth under the assumptions you entered. Whether that rate is reachable is a judgment about the business, and it depends on the discount rate, the fade profile and the terminal rate you chose. EvidInvest shows the arithmetic and the filed history; it does not issue a verdict.

### Can I run a reverse DCF from an AI assistant?

Yes. The EvidInvest MCP server exposes get_reverse_dcf and get_implied_assumptions, so Claude, ChatGPT, Cursor or your own script can solve for the implied growth rate on any covered ticker and get the filed inputs back with it. Free to start, from $10, no subscription.

## Run it yourself

- Calculator, seeded from filed statements: https://evidinvest.com/tools/dcf-calculator?symbol=AAPL
- From an AI assistant, over MCP: `get_reverse_dcf` and `get_implied_assumptions` — https://evidinvest.com/mcp (Markdown: https://evidinvest.com/mcp.md)
- DCF explained from first principles: https://evidinvest.com/learn/dcf-valuation
- Pricing: https://evidinvest.com/pricing (Markdown: https://evidinvest.com/pricing.md)

Research and data software, not investment advice.

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