Using ROE and Retention Rate to find growth rate

CFA Level II Equities
#1

The book cites using ROE to find the sustainable growth rate of a firm, but I’m wondering of how practical this calculation is in the real world.

We are told the CGR = ROE * Retention Rate formula, but what if:

A) The company follows an unusual or residual dividend policy where there is no set payout ratio? Or its most payout ratio was not representative of the company’s future dividend policy?

B) A firms calculated ROE is based on one set of accounting principles compared with its overseas peers?

#2

If i recall right there is other method to value a stock like the DCF or the residual income method, your point is one of the weakness of the gordon growth.

Regarding the ROE, at this step of the analyze you should have already made the necessary adjustment to make the financial statement comparable among peers.