INSTANT CALCULATIONS
OF A STOCK’S POTENTIAL PAYBACK PERIOD (PPP)
AND INTERNAL RATE OF RETURN (IRR)

REGULAR FORMULAS FOR STOCKS WITH MEANINGFUL P/E RATIOS (when EPS > 0)

Formula-of-PPP
Formula-of-IRR

INSTANT CALCULATIONS FOR STOCKS WITH MEANINGFUL P/E RATIOS (when EPS > 0)

#
Companies
Price Earnings Ratio
(multiple) 		EPS Growth Rate
(in %) 		Discount Rate
(in %) 		Potential Payback Period (PPP)
(in years) 		Internal Rate of Return (IRR)
(in %)
Example 27 18 % 4 % 12.14 5.87 %
NVIDIA (*) 61.26 35 % 7.40 % 12.32 5.79 %
1 - -%
2 - -%
3 - -%
4 - -%
5 - -%
6 - -%
7 - -%
8 - -%

(*) Data as of August 09, 2024.
Interest Rate "r" is the discount rate that includes Beta (β) as a risk factor, in line with the CAPM :

r = discount rate = required rate of return = rF + β (rM - rF)

 with :

- Risk-free interest rate (rF) = Yield on the 10-year US Treasury bond = 3.94%.
- Expected market return on US stocks (rM) = 6.00%.
- Beta (β) = risk factor (stock's volatility relative to the market). NVIDIA's β = 1.68.



SPECIAL FORMULAS FOR STOCKS WITH NO MEANINGFUL P/E RATIOS (when EPS < 0 or EPS ≃ 0)

Formula-of-PPP
Formula-of-IRR

INSTANT CALCULATIONS FOR STOCKS WITH NO MEANINGFUL P/E RATIOS (when EPS < 0 or EPS ≃ 0)

Companies Price EPS 2023 EPS 2024 EPS 2025 g r PPP IRR
Example 100 -10 0 10 8 % 2.00 % 11.01 6.50 %
MICRON TECH. (*) 87.51 -0.43 6.59 8.10 15 % 4.14 % 9.67 7.43 %
Company #1 % % - -%
Company #2 % % - -%
Company #3 % % - -%

(*) Data as of January 21, 2024

Price = Share price today
EPS 2023 = Earnings Per Share (EPS) for the current year (year 0)
EPS 2024 = Earnings Per Share (EPS) for next year (year 1)
EPS 2025 = Earnings Per Share (EPS) for the following year (year 2)
g = EPS growth rate (in %) starting year 2
r = Interest rate (in %) today
PPP = Potential Payback Period
IRR = Internal Rate of Return