PVGO Calculator 2026
Present Value of Growth Opportunities
Separate stock value into current earnings vs growth potential
What is PVGO?
📈 PVGO Explained
PVGO (Present Value of Growth Opportunities) is the portion of a stock's value attributed to expected future growth. It separates a stock's price into two components:
- No-Growth Value (E/r): Value if company paid all earnings as dividends with no reinvestment
- Growth Premium (PVGO): Additional value from reinvesting earnings for growth
Formula: Stock Price = No-Growth Value + PVGO, therefore PVGO = Stock Price − (EPS ÷ r)
📈 PVGO Analysis Results
📊 Value Composition
PVGO Formulas
Present Value of Growth Opportunities
No-Growth Value (Value as Cash Cow)
Stock Price Decomposition
PVGO Ratio (Growth Premium)
Earnings Per Share
- Calculate EPS: Divide net earnings by shares outstanding to get earnings per share.
- Determine Cost of Equity: Use CAPM or required return rate (typically 8-12%).
- Calculate No-Growth Value: Divide EPS by cost of equity (E/r).
- Get Current Price: Use the market share price.
- Calculate PVGO: Subtract no-growth value from current price.
Worked Example
📝 Example: Tech Company PVGO
Given: Share price = $100, EPS = $5, Cost of equity = 10%
| No-Growth Value | EPS ÷ r = $5 ÷ 0.10 = $50 |
| PVGO | Price − No-Growth = $100 − $50 = $50 |
| PVGO Ratio | $50 ÷ $100 = 50% |
| Interpretation | Half the stock price is growth expectations |
Insight: 50% of this stock's value comes from expected future growth. If growth fails to materialize, the stock could fall to $50.
PVGO Interpretation Guide
| PVGO Ratio | Interpretation | Stock Type | Risk Level |
|---|---|---|---|
| < 0% | Undervalued or declining business | Deep Value | High (turnaround) |
| 0-20% | Mature, cash-generating company | Value Stock | Low |
| 20-50% | Moderate growth expectations | GARP / Blend | Medium |
| 50-75% | High growth expectations | Growth Stock | Medium-High |
| > 75% | Extreme growth expectations | Speculative Growth | Very High |
PVGO by Sector
| Sector | Typical PVGO | Typical P/E | Notes |
|---|---|---|---|
| Technology | 50-80% | 25-50x | High growth expectations |
| Healthcare | 40-70% | 20-40x | Innovation-driven |
| Consumer Discretionary | 30-50% | 18-30x | Cyclical growth |
| Industrials | 20-40% | 15-25x | Moderate growth |
| Financials | 20-40% | 12-18x | Interest rate sensitive |
| Utilities | 10-25% | 12-18x | Stable, low growth |
| Energy | 5-30% | 8-15x | Commodity dependent |
| REITs | 10-30% | 15-25x | Yield-focused |
PVGO vs Other Metrics
| Metric | What It Measures | Relationship to PVGO |
|---|---|---|
| P/E Ratio | Price to current earnings | Higher P/E = Higher PVGO ratio usually |
| PEG Ratio | P/E divided by growth rate | Low PEG may mean underpriced PVGO |
| DCF Value | Present value of all future cash flows | PVGO is simpler, less precise |
| Dividend Yield | Income return from dividends | High yield often means low PVGO |
| Book Value | Accounting net worth | PVGO captures market expectations above book |
Official Resources
Frequently Asked Questions
PVGO (Present Value of Growth Opportunities) is the portion of a stock's value attributed to expected future growth. It represents the premium investors pay above the no-growth value (EPS/r) for anticipated earnings growth.
PVGO = Stock Price − (EPS ÷ Cost of Equity). Example: If price = $100, EPS = $5, and r = 10%, then PVGO = $100 − ($5 ÷ 0.10) = $100 − $50 = $50.
It depends on your investment strategy. Value investors prefer low PVGO (0-30%). Growth investors accept high PVGO (50%+). A "normal" range is 20-50% for established companies with moderate growth.
Yes! Negative PVGO means the stock trades below its no-growth value. This can indicate: undervaluation, market expects earnings decline, or the company is destroying value through poor reinvestment.
No-growth value = EPS ÷ Cost of Equity. It represents the stock price if the company paid out all earnings as dividends with zero reinvestment and zero growth—essentially a perpetuity.
Common methods: CAPM (Risk-free rate + Beta × Market premium), Build-up method, or investor's required return. Typical ranges: 8-12% for large caps, 12-20% for small/speculative companies.
It helps identify valuation risk. High PVGO stocks can crash if growth disappoints. Low PVGO stocks offer downside protection. It separates what you're paying for today's earnings vs. future hopes.
Higher P/E ratios generally imply higher PVGO. The no-growth P/E = 1/r (e.g., 1/0.10 = 10x). Any P/E above this implies positive PVGO. A 25x P/E at 10% r means PVGO = 60% of price.
DCF values all future cash flows explicitly. PVGO is simpler—it splits current price into "current earnings perpetuity" + "everything else (growth)." DCF is more precise but requires detailed projections.
Trailing EPS uses historical, verified data. Forward EPS uses analyst estimates. For PVGO, forward EPS is often preferred as it reflects current expectations, but be aware of estimate uncertainty.
Created by OmniCalculator.space — Your trusted source for stock valuation calculators.
Last Updated: January 2026