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How is the Implied Growth Rate calculated in Toolkit 6?
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jgtr  
#1 Posted : Friday, October 9, 2009 6:07:34 AM(UTC)
jgtr

Rank: Advanced Member

Posts: 63

How is the Implied EPS growth calculated as shown in the link on the front of the SSG? It is one of several numbers displayed for selecting a future growth rate.
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jimthomas@yahoo.com  
#2 Posted : Friday, October 9, 2009 11:08:18 AM(UTC)
jimthomas@yahoo.com

Rank: Advanced Member

Posts: 105

Visit http://www.bivio.com/pugetsoundbi/files/Toolkit/TK4HotKeys.html and look for Alt+S in the left column. That has the formula used by Toolkit versions 4, 5 and 6.

The formula is ( 100% - Avg%Payout ) x AvgROE but read the link above for the details.
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arminfields  
#3 Posted : Friday, October 9, 2009 1:07:42 PM(UTC)
arminfields

Rank: Advanced Member

Posts: 271

 

Hey Jeff:

I searched the TK 6 manual and quickly found (at page 234) the following explanation:

Implied Growth = % Return On Equity x (1 - Dividend Payout Ratio)

 

From the Stock Study, Toolkit uses the 5-Year Average Return on Equity from Section 2B, and the 5-Year Average Dividend Payout

Ratio from Section 3 for this calculation.

 

For companies that pay no dividends, the Implied Growth Rate will be equal to the Return on Equity. >>

 

Armin

 

 


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jimthomas@yahoo.com  
#4 Posted : Friday, October 9, 2009 5:24:11 PM(UTC)
jimthomas@yahoo.com

Rank: Advanced Member

Posts: 105
> ... and the 5-Year Average Dividend Payout Ratio from Section 3 for this calculation.
That part is incorrect. Toolkit 6 (and 5 and 4) uses the 5-Year Average Dividend Payout Ratio from section 5. The value in section 5 is a judgment item and may be different from the value in section 3.




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jgtr  
#5 Posted : Saturday, October 10, 2009 5:53:34 AM(UTC)
jgtr

Rank: Advanced Member

Posts: 63
Thanks for the help. The tutorial from NAIC on line was excellent.
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gerlach  
#6 Posted : Tuesday, October 13, 2009 6:05:13 AM(UTC)
gerlach

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The manual was updated for the version 6.2 release in June 2009 (you can download the current PDF from http://www.iclub.com/toolkit6/tips/).

Here's what it says in this version of the manual, on pages 234-235:










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The Implied EPS Growth Rate is calculated by the program. This figure is sometimes known as the Sustainable Growth, % Retained Earnings to Common Equity, Plowback Ratio, Implicit Growth, or Internal Growth.

This rate is a theoretical limit on the growth that can be expected by a company based on the usage of its existing assets (that is, without borrowing). This value provides a quick check when selecting a likely future growth rate for a company.

The formula for Implied Growth is:

Implied Growth = % Return On Equity x (1 - Dividend Payout Ratio)

From the Stock Study, Toolkit uses the 5-Year Average Return on Equity from Section 2B, and the 5-Year Average Dividend Payout Ratio from Section 3 (or from Section 5 if adjusted by the user) for this calculation.

For companies that pay no dividends, the Implied Growth Rate will be equal to the Return on Equity.
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