A stock growth rate formula is used to find out how much a Stock has grown for a particular number of years. To calculate the simple growth percentage of the stock the formula is- (Difference between Buying & Current Price)/ Buying price X 100). To find the annual growth rate of any stock, the formula applied is- (Total growth percentage^1 /by the number of years).
Stock Growth Rate formula-
The stock growth rate Formula is the formula for calculating the overall growth in terms of percentage from the date of purchase till the present date annually.
The basic Formula to calculate Growth rate is-
(Difference between Buying & Current Price)/ Buying price X 100.
Let’s take an example of Airtel-
Buying Price- 380.
Current Price-520.
Gain -(520-380)=140
Grown rate- 140/380 x 100 = 36.84%.
In this way, the Growth Rate can be calculated easily for any stock.
On another occasion, if we say that the Price of a stock is projected to grow at 50% annually for the next 2 years where the current price of the stock is at Rs 1200 then to calculate the following-
After 1st year= 50% + 1200 = 1800
After 2nd year =50% =1800 = 2100.
So the approximate price of the stock after 2 years will be 2100 as per the projected growth of 50% annually.
Another method to calculate the Rate of Growth per year is-
(Total growth percentage^1 divided by the number of years).
Let’s understand it in detail-
The Price of ‘Wipro’ has increased from 180 to 400 in 5 years time.
Now to calculate the overall return= Profit/Buying price x 100. (220/180*100) =122.22%
This means that the Net Growth rate of Wipro is 122.22% in 5 years. But if we want to find the yearly growth rate then the following formula has to be applied-
(Total Growth rate^1/Number of years).
122.22^1/5 =24.44%
Hence it can be said that Wipro grew at the rate of 24.44% annually for 5 years.
The use of the Growth rate of a Stock -
- By knowing the growth rate of a Stock, an investor can compare the Stock with Its peers as well as the overall industry in terms of Growth Percentage.
- Knowing the Growth rate in percentage also helps in anticipate the rate of growth in upcoming years by the data available of previous years,