Revenue Growth Rate
Revenue growth rate is the percentage increase in a company's total revenue over a given period. In stock valuation, it is a primary driver of free cash flow projections and terminal value assumptions in DCF models.
Formula
Example
If a company grew revenue from $800M to $960M in one year, the growth rate is 20%. In stock valuation, analysts commonly use a blend of historical rates, analyst consensus, and top-down industry forecasts to project future revenue growth.
Why It Matters
Revenue growth rate is the single most impactful assumption in most DCF stock valuations. A 2% change in the projected growth rate can move the intrinsic value estimate by 20–40%. Using overly optimistic growth assumptions is the most common cause of inflated stock valuation.
How MiniValuator Uses Revenue Growth Rate
MiniValuator allows users to input a high-growth rate for the initial forecast phase and a lower stable rate for the terminal period. The sensitivity heatmap shows how stock valuation changes across a range of growth assumptions.
See It in Action
- How the DCF model calculates intrinsic value
- Financial Services sector intrinsic value analysis
- Energy sector intrinsic value analysis
Related Terms
- Discounted Cash Flow (DCF) — Discounted Cash Flow (DCF) is a fundamental stock valuation methodology that estimates the present v...
- Free Cash Flow (FCF) — Free Cash Flow (FCF) is the cash a company generates from its core business operations after funding...
- Terminal Value — Terminal value represents the present value of all future cash flows beyond the explicit forecast pe...
- Two-Stage DCF Model — A two-stage DCF model divides the forecast period into two phases: a high-growth stage (typically 5–...
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