The expected long-term growth rate should reflect “organic” growth only, so the effect of the acquisitions should be backed out, suggests recent research by Roger Grabowski (Kroll) and Ashok Abbott (West Virginia University). Grabowski conducted an interesting session at the recent ASA 2022 International Conference in Tampa, Fla., and he believes that common approach includes both existing firms and new firms, whose growth is driven by acquisition. Firms such as Amazon and Apple are driving GDP growth—so you can’t assume your subject company will grow at the rate of GDP, he says. Therefore, Grabowski cites research that estimates real long-term growth in aggregate corporate earnings at 3%, with 2% (or two-thirds) attributable to new companies. Therefore, the long-term average real earnings for existing businesses (i.e., organic growth) will, on average, grow at the rate of one-third of real GDP plus inflation.