Definition:

The 10-year Book Value per Share Growth Rate measures the annualized rate at which a company's book value per share has grown over a ten-year period. It provides insight into the company's ability to increase its net asset value on a per-share basis over a significant time frame.

Formula:

((Ending Book Value per Share / Beginning Book Value per Share) ^ (1/10)) - 1

How to use the metric:

Investors use this metric to assess a company's long-term financial health and its ability to generate shareholder value. A consistent growth rate may indicate a company's strong performance and effective management. It is often used in conjunction with other financial metrics to evaluate investment opportunities.

Limitations:

The metric does not account for changes in market conditions or economic cycles that may affect a company's book value. It also does not consider the quality of the assets or liabilities on the balance sheet. Additionally, it may not be useful for companies with significant intangible assets, as these are not typically reflected in book value.

Applies to:

This metric works best in industries where companies have significant tangible assets, such as manufacturing, utilities, and real estate, where book value is a meaningful measure of company value.

Doesn't apply to:

It may not apply well to industries with high levels of intangible assets, such as technology or service-based industries, where book value does not capture the full value of the company. This is because intangible assets like intellectual property and brand value are not reflected in book value.

Summary:

The 10-year Book Value per Share Growth Rate is a useful metric for evaluating a company's long-term ability to grow its net asset value per share. While it provides valuable insights into financial health, it should be used alongside other metrics and with an understanding of its limitations, particularly in industries with significant intangible assets.