Process & Philosophy
Glossary
RBP
The revenue growth necessary to support the current stock price. Required Business Performance® is calculated using third-party valuation models including discounted cash flow that use the current stock price as the primary input.
RBP Probability
The likelihood that management will deliver the Required Business Performance® to support the stock price. It is calculated by fitting the company’s historical revenue growth to a distribution, then finding the company’s Required Business Performance within this historical distribution.
RBP Methodology
Uses third-party valuation models including discounted cash flow to determine what the stock’s current price implies in terms of future free cash flow and revenue (Required Business Performance® ) as well as the calculation of the likelihood that management can deliver the Required Business Performance®, known as RBP® Probability.


Calculating - A Fact-Driven Approach

At New Age Alpha, we reverse the traditional valuation method by starting with the value of a stock as determined by the market. Our methodology utilizes third-party valuation models including discounted free cash flow, company's current stock price, its income statement, balance sheet and cash flow statements to determine what the current price of its stock implies about future revenue growth and RBP®. This process is fact driven.

Transparent Value Approach

How We Calculate RBP® Probability

To determine the RBP® Probability for a given company, we first determine the revenue growth required to support the current stock price. We do this using third-party valuation models including discounted cash flow and the stock price as the input and then solve for the required revenue growth rates.


Then, the company's historical revenue growth rate is fit to a distribution curve using data from the prior twelve quarters. With this curve and the company's required revenue growth rate, we can calculate the probability that management will deliver the required revenue growth.