Present value of growth opportunities

In corporate finance, the present value of growth opportunities (PVGO) is a valuation measure applied to growth stocks.It represents the component of the company’s stock value that corresponds to (expected) growth in earnings. It thus allows an analyst to assess the extent to which the share price represents the current business, and to what extent it reflects assumptions about the future.As a proportion of market cap, PVGO can then also be used in relative valuation, i.e. when comparing between two investments (see similar re PEG ratio). PVGO is calculated as follows:

Present value of growth opportunities

In corporate finance, the present value of growth opportunities (PVGO) is a valuation measure applied to growth stocks.It represents the component of the company’s stock value that corresponds to (expected) growth in earnings. It thus allows an analyst to assess the extent to which the share price represents the current business, and to what extent it reflects assumptions about the future.As a proportion of market cap, PVGO can then also be used in relative valuation, i.e. when comparing between two investments (see similar re PEG ratio). PVGO is calculated as follows: