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