Required Growth Calculator
Enter a stock's EPS, share price and dividend payout, choose the return you want, and see how fast earnings must grow for today's price to deliver it. Adjust the holding period and exit P/E, and compare against the growth the company can fund itself.
An analysis aid, not a recommendation. This shows what a share price assumes under the inputs you choose. It does not say whether any stock is worth buying, selling or holding. Speak to a SEBI-registered investment adviser before acting on anything.
Current P/E: 20.0x
for 5 years to earn 12.0% a year, selling at 20.0x earnings.
Faster than the economy. Achievable for good businesses with room to reinvest, but it has to hold for the whole period.
Dividend yield today
₹7.5 a share
Earnings growth
the number this tool solves for
Change in P/E
20.0x → 20.0x
Return ≈ dividend yield + earnings growth + change in P/E. The three parts add up only roughly, because they compound on each other; the headline figure is solved exactly.
| Today | Year 5 | |
|---|---|---|
| EPS | ₹25 | ₹40.9 |
| P/E | 20.0x | 20.0x |
| Share price | ₹500 | ₹818 |
| Dividends collected | – | ₹50.87 |
Add the company's ROE to compare the growth the price needs with the growth it can pay for from the profit it keeps: ROE × (1 − payout).
| Target return ↓ / Exit P/E → | 16.0x | 20.0x (yours) | 24.0x |
|---|---|---|---|
| 9.0% | 12.1% | 7.4% | 3.7% |
| 12.0% (yours) | 15.1% | 10.3% | 6.6% |
| 15.0% | 18.2% | 13.3% | 9.4% |
Exit P/E 20% below and above your choice, and target return 3 points either side.
A shareholder earns money two ways: dividends, and the share price going up. Since price is P/E multiplied by EPS, the price can only rise if earnings rise or the market pays a higher multiple. That gives a three-part formula.
The Formula
Return ≈ dividend yield + earnings growth + change in P/E
Most people use it forwards: guess the growth, get a return. This calculator turns it around. You choose the return you want, and it tells you how fast earnings must grow for today's price to deliver it. That turns a vague question ("is this expensive?") into a concrete one: can this company really grow its profit that fast, for that long?
Take a stock at ₹266 with EPS of ₹15.84 and a 92% payout. The dividend yield is about 5.5%, so for a 12% return with the P/E unchanged, earnings need to grow about 6.2% a year. The full worked example is in our post on valuing banks and gold-loan companies.
The exit P/E matters more than it looks
A stock at 60x earnings that drifts to 45x over five years loses about 5.6% a year from the shrinking multiple alone. Earnings then have to grow over 20% a year just to deliver 15%. Try a lower exit P/E before trusting a result built on today's.
Clean the EPS first
A one-off gain inflates EPS and makes the required growth look easier than it is. Use underlying earnings, and think about changes already coming, such as a tax increase. Our guide to P/E ratios covers how.
Compare with what the business can fund
A company can grow from its own profit at roughly ROE × (1 − payout). If the price needs much more than that, the extra must come from a rising ROE, more debt, or pricing power, and you should be able to say which.
Not for lenders or cyclicals
Banks and NBFCs are better judged on price-to-book against ROE. Metal and commodity companies earn the most at the top of their cycle, so today's EPS is a poor base to grow from. See Valuation 101 for other methods.
How this works: EPS grows at a constant rate each year, dividends are paid at the end of each year as your payout share of that year's EPS and are not reinvested, and you sell at the chosen P/E at the end of the holding period. The growth rate shown is the one that makes the present value of those cash flows, at your target return, equal today's price. Taxes and costs are ignored. Not suited to banks and other lenders, which are better judged on price-to-book against ROE (see how to value banks and gold-loan companies). This is educational and not investment advice; see our full disclaimer.