Equity Valuation
Sustainable Growth Rate
Definition
What is Sustainable Growth Rate?
The rate at which a company can grow using retained earningsCumulative profit kept in the business rather than distributed to shareholders. while maintaining its financial policies, under the model used.
Example in practice
How This Looks in Practice
A 15% ROE and 60% retention ratioThe proportion of earnings retained after dividends. imply roughly 9% sustainable growth.
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Related Terms
Equity Valuation
Earnings Per Share
Net income attributable to ordinary shareholders divided by weighted average ordinary shares.
Equity ValuationDiluted Earnings Per Share
Earnings per share assuming potentially dilutive securities convert into ordinary shares.
Equity ValuationBasic Earnings Per Share
Earnings per share calculated using actual weighted average ordinary shares outstanding.
Cash Flow AnalysisOperating Cash Flow
Cash generated or used by a company's core operations.