Hi all, i am currently reading Value the Cornerstones of Corporate Finance and i came across a particular section discussing revenue growth and share price (see below on the excerpt). Could someone explain to me how the calculation for growth rate of 26% was derived?
You can estimate the required performance by reverse engineering your share price in terms of expected revenue growth and ROIC. Take Home Depot, which, at the beginning of 1999, had a market value of $132 billion, with an earnings multiple of 47. Using a discount cash flow model, assuming constant margins and ROIC, Home Depot would have had to grow revenues 26 per- cent per year over the next 15 years to maintain its 1999 share price.