Use our Gordon Growth Model Calculator to accurately estimate the intrinsic value of a stock. This financial tool helps investors perform a dividend discount model (DDM) valuation, considering future dividend growth and required returns to find a fair price for long-term investments.
Formula:
The Gordon Growth Model (GGM) is used to determine the intrinsic value of a stock based on a series of future dividends that grow at a constant rate.
Formula:
P = Dā / (r - g)
- P = Current Stock Price / Intrinsic Value
- Dā = Expected Dividend Per Share Next Year
- r = Required Rate of Return (Cost of Equity)
- g = Constant Growth Rate of Dividends
Note: The required rate of return (r) must be greater than the dividend growth rate (g).