Question 11 is where a teardown earns its keep, because it converts a price into a claim about the future you can judge. You are not valuing the company; you are inverting today's multiple to read the growth, margin, or return it is assuming, then asking whether that assumption is easy or hard given everything Q1–Q10 told you. Three back-of-envelope inversions, one per multiple family: the fast cousins of M3.05's reverse DCF and M4.05's implied-CAP inversion.
How is the implied growth rate from PE calculated?
(a) Reverse the P/E: the multi-stage "priced-in growth" inversion. The cleanest teardown question: if I pay today's P/E, want a fair return r, and the multiple fades over N years to a still-defensible terminal P/E, what earnings growth must the company deliver? Ignoring dividends for the back-of-envelope:
g_implied = (1 + r) × (PE_now / PE_terminal)^(1/N) − 1
Derivation (keep it in your head): to earn r, price must grow at r, so EPS₀·(1+g)^N·PE_term = EPS₀·PE_now·(1+r)^N; cancel EPS₀ and solve. Worked: a stock at PE_now = 50, you require r = 9%, you assume it de-rates over N = 10 years to a still-premium PE_term = 25: g = 1.09 × (50/25)^0.1 − 1 = 1.09 × 1.0718 − 1 ≈ 16.8%. Read: "at 50×, the price implies ~17% EPS growth for a decade even if the multiple halves to a still-rich 25× — is that plausible given the business grows ~10%?" That sentence is the teardown's price verdict, and it is far more useful than "50× is expensive."
(b) Reverse the P/E: the one-line Gordon version (for mature payers). For a stable, dividend-paying franchise, PE ≈ payout / (r − g), so g_implied ≈ r − payout / PE. At r = 11%, payout = 40%, PE = 25: g ≈ 0.11 − 0.40/25 = 9.4% perpetual. Use this as a sanity cross-check on (a); if the implied perpetual growth exceeds long-run nominal GDP (~10–11% India, ~4–5% US), the price is asserting the company outgrows the economy forever, a red flag by construction (M3.05's terminal-growth law).
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How do you reverse EV/EBITDA and P/B?
(c) Reverse EV/EBITDA (or EV/EBIT): the margin-and-growth read. EBITDA multiples resist a clean one-liner because they mix growth, margin, capital intensity, and tax, so do it structurally: convert EV/EBIT to EV/NOPAT (÷ by (1−tax)-adjusting EBIT), and recall from M4.05 that EV/NOPAT maps almost one-to-one to a competitive-advantage period at given ROIC and WACC. An EV/NOPAT of ~8× is roughly a zero-CAP no-moat business, ~16× is roughly a twenty-year moat. So a 15× EV/EBIT franchise is the market granting ~15–20 years of above-hurdle returns; ask whether the moat evidence (Q6) supports that many years. For a quick growth read, an EV/EBITDA far above the sector norm is pricing either superior growth or superior margin/returns. Name which one, and check it against Q7.
(d) Reverse P/B (for banks, NBFCs and insurers, the sector where P/E lies). From M3.06, justified P/B ≈ (ROE − g) / (r − g). Invert it: given the market's P/B and a reasonable r and g, solve for the ROE the price is assuming, and compare to the ROE the bank actually earns. At P/B = 3.0, r = 13%, g = 8%: implied ROE = g + P/B×(r − g) = 0.08 + 3.0×0.05 = 23%. Read: "at 3× book the market is assuming ~23% sustainable ROE — this NBFC earns ~20% and is slowing; the price is demanding." This single inversion is why you never value a lender on P/E in a teardown (M5.01–M5.02).
What should the answer look like?
The output of Q11 is never a valuation. It is a sentence of the form "the price is implying [X]; given Q1–Q10, that looks [easy / a stretch / heroic]." That sentence, set against the quality verdict, is Q12.