What is a reverse DCF?
A reverse DCF runs a discounted cash-flow model backwards. Instead of estimating growth to produce a value, it starts from today's share price and solves for the growth rate that price already assumes. The output is a single expectation you can weigh against how often companies of that size ever delivered it.
How it works
An ordinary cash-flow valuation asks you to forecast growth, margins and reinvestment, then hands back a value. The forecast is the hard part and the value inherits every bit of optimism in it, which is why two analysts can value the same company at half and double.
A reverse DCF inverts the question. Hold the discount rate and the business's economics where they are, take the market price as given, and ask what growth rate makes the model agree with that price. The answer is a reading of what the market is already paying for, rather than an estimate of our own.
That reframing is what makes it useful, because the output is falsifiable in a way a target price is not. A price implying that revenue compounds at a certain rate for a decade is a claim you can check against the historical record of how many companies that size ever did it. If almost none did, the price is a bet against the base rate, and you can decide whether you want to take it.
The limit worth naming: implied growth is only as meaningful as the rest of the model held fixed around it. Change the discount rate or the assumed steady-state profitability and the implied growth changes with them. It is a way of stating a price's assumptions, not a measurement of the company.
Where you see this in the terminal
Expectationsnames ranked by the growth their price implies, against the record for that size
Base rateshow often companies of a given size actually delivered the growth being implied
The valuation enginethe cash-flow model the implied figure is solved out of
The conventions behind it
What this page explains in plain language, the methodology documents state as conventions: the inputs, what is rejected, and the stated limits.
More of these: every concept page. The full transparency index is at Methodology.