Growth rates are the percent change of a variable over time. It can be applied to GDP, corporate revenue, or an investment portfolio. Here’s how to calculate growth rates.

$2.50 / (11% required return or 0.11 - 5% dividend growth rate or 0.05) = $41.67 Given that valuation, if the stock trades around that price, it's a fair value for investors.

The Rule of 70 is a useful tool but it has limitations. For one, the rule assumes a constant growth rate, which is rarely seen in real-world scenarios.

Also, assumptions about a constant growth rate indefinitely into the future aren't very realistic, and changes in the cost of equity capital can also result in changing stock prices even under the ...