http://freestuffforbabies.net/why-do-i-get-a-negative-value-when-i-try-to-value-this-stock.html Free Stuff For Your Baby Sat, 19 May 2012 13:37:05 +0000 hourly 1 http://wordpress.org/?v=3.3.2 http://freestuffforbabies.net/why-do-i-get-a-negative-value-when-i-try-to-value-this-stock.html/comment-page-1#comment-10465 AZNYC Tue, 13 Jul 2010 06:00:12 +0000 http://freestuffforbabies.net/why-do-i-get-a-negative-value-when-i-try-to-value-this-stock.html#comment-10465 It looks like you're getting an extremely high growth rate, based on the ROE of 58%. If growth rate is greater than required return, then of course you're going to end up with a negative value. DDM formula is meant to be used for long-term sustainable growth. It's hard to believe that the ROE of 58% can be sustained for the indefinite future. If the figure is correct, I think you might have to use another model, like a multi-stage dividend growth model. It looks like you’re getting an extremely high growth rate, based on the ROE of 58%. If growth rate is greater than required return, then of course you’re going to end up with a negative value.
DDM formula is meant to be used for long-term sustainable growth. It’s hard to believe that the ROE of 58% can be sustained for the indefinite future. If the figure is correct, I think you might have to use another model, like a multi-stage dividend growth model.

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