PVGO Calculator

Find how much of a stock's price reflects expected future growth. Enter the share price, trailing earnings per share, and required rate of return to split the price into its no-growth value and its present value of growth opportunities (PVGO).

Quick Facts

Formula
PVGO = Price − (EPS ÷ r)
EPS ÷ r is the no-growth value: the per-share value if all earnings were paid out forever with no growth.
Interpretation
PVGO is the growth premium
A positive PVGO means the market is paying for earnings growth the company has not yet delivered.

Your Results

Calculated
PVGO per share
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Price − no-growth value
No-growth value per share
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EPS ÷ required return
PVGO share of price
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PVGO ÷ current share price
Total company PVGO
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PVGO per share × shares outstanding

Ready

Enter share price, EPS, required return, and shares outstanding, then press Calculate.

How the PVGO Calculator works

Present Value of Growth Opportunities (PVGO) splits a stock's market price into two pieces: the value the company would be worth if it simply paid out all of its current earnings forever with zero growth, and the extra value the market is paying because it expects earnings to grow beyond that. PVGO is that second piece.

The formula

For a share price P, earnings per share EPS, and a required rate of return r (the cost of equity, i.e. the return investors demand for the stock's risk):

No-growth value per share = EPS ÷ r

PVGO = P − (EPS ÷ r)

The no-growth value comes from treating EPS as a level, perpetual cash flow and discounting it at r — the standard perpetuity formula. Whatever the market price exceeds that perpetuity value by is priced-in growth. PVGO can also be expressed as a percentage of price (PVGO ÷ P), which shows what share of the stock's value is attributable to future growth rather than current earnings power.

Worked example

Take a stock trading at $150 with trailing EPS of $5.00 and a required return of 9%. The no-growth value per share is $5.00 ÷ 0.09 ≈ $55.56. PVGO is $150 − $55.56 = $94.44 per share, or about 63% of the price. In other words, roughly two-thirds of that stock's price reflects the market's expectation of future earnings growth, not the earnings the company generates today.

Reading a positive or negative PVGO

  • Large positive PVGO: the market is pricing in substantial future growth. This is typical of young, fast-growing companies with modest current earnings but high expected reinvestment returns.
  • Small or near-zero PVGO: the price is close to what the no-growth perpetuity value implies — the market expects earnings to roughly hold steady rather than compound.
  • Negative PVGO: the market price is below the no-growth value, which can signal that investors expect earnings to decline, that the current EPS figure is unusually high (e.g., a one-off gain), or that the chosen required return is too low for the stock's actual risk.

Assumptions and limits

This calculator uses trailing (or a single estimate of) EPS as a flat perpetuity and a single required rate of return you supply — it does not forecast future earnings itself. The required return should reflect the stock's risk (commonly estimated with the Capital Asset Pricing Model) and is the same discount rate used to value a no-growth, all-dividend version of the company. Total company PVGO simply multiplies the per-share figure by shares outstanding; it does not adjust for dilution, buybacks, or non-common claims on equity. This is a computational tool for understanding valuation mechanics, not investment advice — pair it with your own research or a licensed financial advisor before acting on it.

Frequently Asked Questions

What does PVGO actually measure?
PVGO (Present Value of Growth Opportunities) is the portion of a stock's current market price that is not explained by its existing earnings power. It equals the share price minus the no-growth value per share (EPS divided by the required rate of return). A high PVGO means investors are paying largely for expected future growth rather than today's earnings.
What is the "no-growth value" in the formula?
No-growth value per share (EPS ÷ r) is what the stock would be worth if the company paid out 100% of its current earnings as a dividend every year forever, with no growth in that dividend. It is the standard present value of a perpetuity applied to EPS, and it serves as the baseline PVGO is measured against.
Can PVGO be negative?
Yes. A negative PVGO means the market price is lower than the no-growth perpetuity value implied by current EPS and the required return. That can reflect expected earnings declines, an unusually high or non-recurring EPS figure, or a required return that understates the stock's true risk.
What required rate of return should I use?
Use the stock's cost of equity — the return investors require given its risk, often estimated with the Capital Asset Pricing Model (risk-free rate plus beta times the equity risk premium). Because PVGO is sensitive to this rate, it is worth checking the result with a slightly higher and lower required return to see how much the growth estimate depends on that assumption.

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