what are the drawbacks of the gordon growth model 
the ggm s main limitation lies in its assumption of constant growth in dividends per share it is very rare for companies to show constant growth in their dividends due to business cycles and unexpected financial difficulties or successes the model is thus limited to companies with stable growth rates in dividends per share another issue occurs with the relationship between the discount factor and the growth rate used in the model if the required rate of return is less than the growth rate of dividends per share the result is a negative value rendering the model worthless also if the required rate of return is the same as the growth rate the value per share approaches infinity 1the bottom linethe gordon growth model is a popular formula that s used to find the intrinsic value of a company s stock generally when the model s calculation results in a figure that s higher than the current market price of a company s shares the stock is seen as undervalued and should be considered a buy when the ggm result is lower than the current trading price the stock is seen as overvalued and should be considered a sell a downside of the gordon growth model is its assumption that dividend payouts grow at a constant rate this makes it useful only when considering the stock of those select companies with dividends that match that assumption in addition should the formula s required rate of return be less than the dividend growth rate the result will be negative and of no value 