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.


RBP® Probability

The probability management will deliver the Required Business Performance® to support the stock price is called RBP® Probability. The RBP® Probability, provides an objective, disciplined, rules-based way of measuring the probability that management will deliver the Required Business Performance®.


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 model 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.