What is the use of PVGO Calculator?
The Present Value of Growth Opportunities (PVGO) Calculator helps investors assess the value of a company's future growth opportunities. By analyzing the PVGO, investors can distinguish between the value derived from existing assets and future investments. This helps in evaluating whether a company is effectively utilizing growth opportunities and if its stock is fairly priced, aiding better investment decisions.
Formula of PVGO:
PVGO = Current Stock Price - (Earnings per Share / Required Rate of Return)
How to use the PVGO Calculator?
To use the PVGO Calculator, enter the current stock price, earnings per share (EPS), and the required rate of return (ROR). Click the "Calculate" button to get the PVGO. The calculator subtracts the value of assets from the stock price to determine the worth of growth opportunities. The result shows whether future investments justify the stock price.
Frequently Asked Questions (FAQs)
1. What does PVGO stand for?
PVGO stands for Present Value of Growth Opportunities. It measures the value of a company’s potential future investments beyond its existing assets.
2. Why is PVGO important?
PVGO helps investors understand how much of a stock's value is due to expected future growth. High PVGO suggests significant growth potential.
3. How is PVGO calculated?
PVGO is calculated by subtracting the value derived from current earnings (EPS divided by ROR) from the current stock price.