# This is stock analysis question. Grahams intrinsic value calculation, per se, is interesting, but it isnt of much practical value since it hinges on analysts long-term earnings growth forecasts. While analysts strive to accurately predict a companys current quarters earnings,

This is stock analysis question.

Graham’s intrinsic value calculation, per se, is interesting, but it

isn’t of much practical value since it hinges on analysts’ long-term earnings

growth forecasts. While analysts strive to accurately predict a company’s

current quarter’s earnings, they’ll undoubtedly revise their

forecasts for the next quarter based on the current quarter’s results. Consequently,

their long-term growth forecasts are likely to be considerably

off the mark.

However, Graham’s formula can be very insightful used another

way. If you substitute the current stock price for intrinsic value and implied

earnings growth for forecast growth, and then do some algebraic

manipulation, you get:

Implied growth rate = P/E (AAA bond yield /8.8) –4.25

Implied growth, as defined it, is the long-term average annual

earnings growth that the company would have to achieve to justify

its current P/E.

- Use AAA (highest quality) corporate bond rates as a proxy for prevailing interest rates 4.4 percent when he first devised the formula, so the revised version looks like:

Provide an example of a growth company with an implied growth rate?

- Expert Answer

## If the AAA corporate bond rate is 4 4 percent and the compan View the full answer

**Related Book For**

## Financial Statement Analysis

ISBN: 978-0078110962

11th edition

Authors: K. R. Subramanyam, John Wild

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