When calculating the intrinsic value of a business, whether you’re using Adam Khoo’s method from his Whale Investor course or relying on an automated DCF model like AlphaSpread‘s, one thing is clear: growth projections are crucial. They are the linchpin in accurately determining a company’s future potential. In fact, the growth rate is the key factor that can either validate or undermine the reliability of your valuation. In this post, we’ll dive into how to effectively calculate and incorporate the growth rate into your intrinsic value analysis.
Here’s how you can do it.
Yahoo finance: We prefer retrieving the values via the past 5 years revenue growth. This helps us to conservatively keep our projections accurate and safe.
Why use revenue instead of EPS or cashflow growth rate?
EPS is the net income per share. This can fluctuate and variance due to alot of other factors such as company’s non-operational costings or one-time expenses. Its a very concise way to measure the IV but not consistent.
Cashflow can fluctuate too with the Net income. Hence we wouldn’t use that as a gauge. Unless you are prepared to deep dive into each row for deeper analysis.
Lets use MSFT as an example. A simple way to get its growth rate will be to.
- 2025: $281,742,000
- 2024: $241,122,000
- 2023: $211,915,000
- 2022: $198,270,000
Microsoft have quite a consistent growth, so its easy.
Growth Rate: Current.yr-Prev.yr/Prev.yr.
MSFT Growth Rates:
- 2025: +16%
- 2024: +13%
- 2023: +6.88%
- 2022: –
Take the Total: 35.88/3 = +11.96 will be your average growth rate for microsoft.
This is what we are also using for IV calculations in our proprietary stocklist which we are offering at a extremely low rate for a limited time only! This helps us to keep our valuations realistic, conservative and consistent.