Share Price Calculator
Estimate a stock's intrinsic value from its expected dividend using the Gordon Growth Model.
How the Gordon Growth Model works
The Gordon Growth Model values a stock as the present value of a dividend that grows at a constant rate forever: price = D1 / (r − g). It's a simplification — real dividend growth is never perfectly constant — but it's a widely used starting point for valuing stable, mature dividend-paying companies. The sensitivity table below shows how much the resulting valuation swings as your assumptions for required return and growth rate shift, which is often more informative than the single headline number on its own.
With this calculator's defaults — a $2.50 expected dividend, 9% required return, 4% growth — intrinsic value is D1 / (r − g) = 2.50 / (0.09 − 0.04) = $50.00. Because the growth rate sits in the denominator's gap from the required return, a swing of just one percentage point in either assumption meaningfully moves the result, which is exactly what the sensitivity table is designed to expose. The GGM is a special case of a full discounted cash flow analysis that uses dividends instead of free cash flow — for other approaches to valuing a company, see the Valuation Multiples calculator, WACC calculator, and Free Cash Flow calculator.
Frequently asked questions
- What is the Gordon Growth Model?
- A way of valuing a stock as the present value of an infinite stream of dividends that grow at a constant rate forever: price = D1 / (r - g), where D1 is next year's expected dividend, r is your required rate of return, and g is the expected long-term dividend growth rate.
- Why does required return have to be greater than the growth rate?
- If growth caught up to or exceeded your required return, the formula's denominator would hit zero or go negative — implying an infinite or nonsensical value. The model only holds for stocks expected to grow slower than your required return, indefinitely.
- What does the sensitivity table show?
- How the intrinsic value changes as the required return and growth rate each shift by a percentage point or two around your inputs — useful for seeing how much the valuation depends on assumptions that are inherently uncertain. Combinations where the growth rate would equal or exceed the required return show as N/A.
- What's a reasonable growth rate to assume?
- This varies enormously by company and sector — the model is most reliable for mature, stable dividend payers where a long-run growth assumption is plausible, and least reliable for high-growth or non-dividend-paying stocks.
- Can I use this in my own app?
- Yes — every calculator on Stupidly Clever has a matching REST API and MCP tool that runs the same underlying logic.
- What is the Gordon Growth Model (GGM) and when is it appropriate?
- The GGM (also called the Dividend Discount Model) values a stock as the present value of all future dividends, assuming they grow at a constant rate forever. It works best for mature, stable dividend-paying companies (utilities, large-cap consumer staples) and is poorly suited to growth companies that pay no dividend or have volatile payout ratios.
- What is the difference between the Gordon Growth Model and a DCF?
- The GGM is a simplified special case of a DCF that uses only dividends and assumes a single constant growth rate in perpetuity. A full DCF models free cash flow explicitly and can handle multiple growth stages, making it more flexible — but requiring more inputs and assumptions.