Sustainable Growth Rate Calculator (SGR) — Higgins Model
The sustainable growth rate (SGR) is the highest rate at which a company's sales can grow while keeping its debt-to-equity ratio and profit margins constant and without issuing new shares. Enter the four DuPont drivers to calculate it instantly.
%
%
Maximum rate of sales growth without changing financial leverage or issuing new equity
70 %
retainedRetained (reinvested)
70%
Paid as dividends
30%
- 1
DuPont ROE
8% × 1.2 × 2 ÷ 100 = 19.2%Net margin × asset turnover × equity multiplier - 2
Retention ratio (b)
1 − 30% = 70% = 0.7 - 3
ROE × b
0.192 × 0.7 = 0.1344 - 4
Sustainable Growth Rate
0.1344 ÷ (1 − 0.1344) × 100 = 15.53Higgins formula: SGR = (ROE × b) ÷ (1 − ROE × b)
How does this calculator work?
Sustainable Growth Rate (SGR) = (ROE × b) / (1 − ROE × b), where ROE = Net Margin × Asset Turnover × Equity Multiplier and b = 1 − Dividend Payout Ratio. A firm with ROE = 15% and a 30% payout ratio (b = 70%) has SGR ≈ 11.8% — the maximum sales growth it can sustain without changing its capital structure or issuing new shares.
Formula
How this is calculated
Robert Higgins's sustainable growth rate model answers a key strategic question: how fast can a company grow on its own earnings without needing external financing or changing its capital structure? The answer depends on two things: how profitable the firm is (ROE, computed via the three-factor DuPont decomposition) and how much of those profits it ploughs back rather than distributing as dividends (the retention ratio b = 1 − DPR). Higgins's formula is SGR = (ROE × b) / (1 − ROE × b), which accounts for the compounding effect of reinvested earnings on the equity base.
If actual growth exceeds SGR, the firm must either increase leverage, improve profitability, cut dividends, or raise new equity. If it grows below SGR, excess cash accumulates. Understanding the gap between actual and sustainable growth is a standard tool in corporate financial planning and credit analysis.
Limitations: the model assumes constant profit margins, asset turnover, leverage and payout ratio — assumptions that rarely hold for long. It is a snapshot benchmark, not a forecast. Cyclical firms, those in rapid transformation, or companies with volatile margins should treat the result as directional rather than precise. The equity multiplier here equals total assets ÷ equity (≥ 1); an all-equity firm has EM = 1.
Frequently asked questions
Growth above the sustainable rate requires additional funding: raising new equity, increasing leverage, reducing dividends, or improving profitability. Without one of these changes, the balance sheet will deteriorate — cash will run short and debt will rise relative to equity.
A higher payout ratio reduces the retention ratio b, leaving less profit to fund growth — which lowers SGR. Companies that pay no dividends (b = 1) have the highest possible SGR for a given ROE; those paying out 100% of earnings have SGR = 0.
DuPont breaks ROE into three drivers: net profit margin (profitability per dollar of sales), asset turnover (sales generated per dollar of assets), and the equity multiplier (financial leverage = assets ÷ equity). Multiplied together they give ROE = NPM × ATO × EM, making it easy to identify which lever is limiting or inflating returns.
Also known as
TG we-Calculate Editorial Team. (2026). Sustainable Growth Rate Calculator (SGR) — Higgins Model [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/sustainable-growth-rate-calculator
TG we-Calculate Editorial Team. "Sustainable Growth Rate Calculator (SGR) — Higgins Model." TG we-Calculate. 2026. https://we-calculate.com/calculator/sustainable-growth-rate-calculator.
TG we-Calculate Editorial Team, "Sustainable Growth Rate Calculator (SGR) — Higgins Model," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/sustainable-growth-rate-calculator
@misc{wecalculate_sustainable_growth_rate_calculator, title = {Sustainable Growth Rate Calculator (SGR) — Higgins Model}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/sustainable-growth-rate-calculator}}, year = {2026}, note = {TG we-Calculate} }
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