On 11 May 2026 FormFactor (Nasdaq: FORM) used its investor day to set 2030 targets: revenue of $1.6bn, non-GAAP gross margin of 55% and non-GAAP EPS of $5. The usual first move with a target like that is to reverse-engineer it: compound today's share price at the required return to the end of 2029, divide by an exit multiple, and compare the FY2030 earnings the price seems to demand with the company's number.
Take the 22 September 2026 close of $126.01, a discount rate of 10.82% and an exit at the current forward P/E of 41.50x, and the answer is FY2030 EPS of $4.75 on the company's basis, 4.9% short of $5. It is tempting to write that up as “the share price implies 2030 EPS of $4.75, so the market is already pricing the company's plan”.
Rerun it at a different price and the problem shows. On the same yardstick the reading is $4.43 with the stock at $60 and $4.90 with the stock at $250: across that whole range, the “price-implied” EPS stays between $4.43 and $4.90. This piece takes the arithmetic apart: how the price drops out, how to check for it, and where the price information actually sits.
Where the price cancels
The reverse calculation has two steps. Equity value per share at the end of FY2029 is price × (1 + k)^t, with t the 3.27 years from the reference date to 31 December 2029; implied FY2030 EPS is that value divided by the exit multiple.
The trouble is the exit multiple. A current forward P/E is, by definition, the price divided by consensus NTM EPS. FORM's consensus for the quarterly window is $3.037, and $126.01 ÷ $3.037 is exactly the 41.50x used above. Put that multiple into the second step and the price appears above and below the line:
implied FY2030 EPS = price × (1 + k)^t ÷ (price ÷ consensus NTM EPS) = consensus NTM EPS × (1 + k)^t
With the price gone, what is left is consensus NTM EPS compounded at 10.82% for 3.27 years. The report's full calculation also deducts net cash at the end of FY2029, adds back its interest and converts Zacks-basis EPS to the company basis; those small terms are the only reason the reading drifts at all between $60 and $250. So $4.75 answers a narrower question than it appears to: is consensus growth consistent with the company's 2030 plan? It is. It says nothing about what the share price is betting on.
The price information sits in a fixed multiple
A reading carries price information only when the exit multiple is not derived from today's price. Keep the discount rate at 10.82% and fix the multiple instead: the peer median NTM P/E of 36.0x gives $5.35, 7% above the target; 30x gives $6.24, 25% above; SOXX's 21.9x gives $8.23, 65% above.
The price grid puts the two side by side. At a fixed 36.0x, a share price of $60 maps to $2.83, $90 to $3.98, $126.01 to $5.35, $150 to $6.26 and $200 to $8.16, so the reading moves with the price. Recomputed at each price's own current multiple, it stays between $4.43 and $4.90 all the way from $60 to $250. The gap between those two columns is where the price information went.
A fixed multiple has its own cost: the whole answer now rests on one assumption. Cut the exit multiple from 41.5x to 30x and the reading rises from $4.75 to $6.24, so a fixed-multiple reading should come with its grid and a range. For FORM, the report moves the exit multiple 30% either way and the discount rate 1pp either way, which spans $3.77–6.59.
One multiple, three denominators
“Current forward P/E” looks like a single number; change the denominator and it becomes three. On the reference date FORM traded at 41.50x the quarterly-window consensus of $3.037, 40.35x the day-weighted fiscal-year figure of $3.123 and 42.4x the four-quarter sum of $2.97. Against peers, use the four-quarter sum, because that is how the 36.0x peer median is built; against SOXX, use the day-weighted basis on which its 21.9x is computed; the pricing function behind the reverse calculation uses the quarterly window. One entry in the report's revision log is exactly this: the draft set 40.35x beside the 36.0x peer median, and every comparison now states its denominator.
A four-step check
- Write the reverse calculation out as algebra and ask whether the exit multiple is computed from the current price. If it is, the price will cancel.
- Rerun it at several prices. If the reading hardly moves, it is measuring consensus, not the price.
- For price information, fix the exit multiple at a level not derived from today's price, such as a peer median or the stock's own history, and show a grid across multiples and discount rates.
- Name the reading for what it is: “consensus compounded at the required return”, not “price-implied”. If there is only one consensus snapshot, say that the reading has no time series and cannot show which way consensus is moving.
Our own draft made the same slip
The first draft of this report called $4.75 the “price-implied FY2030 EPS” in its subtitle, on its title page and in core conclusion 8. The second round of internal review pointed out that the price cancels. The wording became “the E1 reading on the rating basis” (E1 is price reverse-engineering, the first of the report's five kinds of mispricing evidence), the fixed 36.0x reading was added beside it, and an appendix now carries the price grid above. The change is row 66 of the revision log in Appendix C. The reverse-engineering rule written down before the research began was left alone; what changed was the reading's name and how it is read. Swapping the yardstick after seeing the result would let the result choose the method.
Where this sits in the report
Price reverse-engineering is the first of five kinds of mispricing evidence in Chapter 11 of our FormFactor deep dive (first edition). The other four in that chapter are an event study of the stock's reaction to earnings days and the investor day, peer-multiple percentiles, the options-implied distribution, and a holder-structure check built on a β decomposition of returns. The rest of the report takes apart the probe-card gross-margin step, a share panel of the four listed probe-card makers and the accounting clock of the new Farmers Branch plant. Methodology is at Research methods; for the same family of basis problems, see the blank field in a Form 144 and the share-count trap in price-to-sales and IREN's two accounting standards.
Research content; not investment advice.