What does it do?
This stock valuation calculator uses the present value of growing perpetuity formula to calculate the stock valuation based on a series of ever increasing dividend payments.
The stock valuation formula is based on the Gordon growth model which is discussed in more detail in our How to Value a Stock tutorial.
Because of the requirement for a constantly growing dividend payment, the calculator is best suited to a stable business which is expected to experience steady growth, and to pay out regular increasing dividends to shareholders.
Stock Valuation Formula
The calculator uses the present value of a growing perpetuity formula as shown below:
PV = Stock Price = Pmt / (i - g)
Pmt = Dividend at the end of the first year (Periodic payment)
i = Rate of return for equity investors (Discount rate)
g = Dividend growth rate
The Excel stock valuation calculator, available for download below, is used to compute a stock valuation by entering details relating to the first dividend, the constant dividend growth rate, and the investors required rate of return. The calculator is used as follows:
Enter the first dividend (Pmt). This is the dividend received at the end of the first period.
Enter the dividend growth rate (g). The dividend growth rate is the rate at which the first dividend (Pmt) is growing each period. The rate should be for a period, so for example, if the period is a year, then the rate should be the yearly dividend growth rate.
Enter the required investor return rate (i). The required investor return rate is the rate used to discount each payment amount back from the end of the period in which is was made, to the beginning of period 1 (today). The rate should be for a period, so for example, if the period is a year, then the rate should be the yearly rate.
The stock valuation calculator works out the present value of the dividend payments which is amount an investor should be prepared to pay for the stock. The answer is the value today (beginning of period 1) of an a regular dividend which is growing at a constant rate (g), received at the end of each period forever, and discounted at the investors required rate of return (i).
Stock Valuation Calculator Download
The stock valuation calculator spreadsheet is available for download in Excel format by following the link below.
The stock valuation calculator is one type of tvm calculator used in time value of money calculations, discover another at the links below.
Users use this free share valuation calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a stock share calculator that you might use when considering how to value a share. It is purely illustrative of a common stock valuation calculator. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in this stock price calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.