Definition:

The 10-year EBITDA per Share Growth Rate measures the compound annual growth rate (CAGR) of a company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) per share over a ten-year period. It provides insight into the company's long-term profitability and operational efficiency growth.

Formula:

EBITDA per Share Growth Rate = [(EBITDA per Share at End of Period / EBITDA per Share at Start of Period) ^ (1/10)] - 1

How to use the metric:

Investors and analysts use the 10-year EBITDA per Share Growth Rate to assess a company's historical growth in profitability and operational efficiency. A higher growth rate indicates strong performance and potential for future growth, making it a valuable metric for long-term investment decisions.

Limitations:

The metric relies on historical data and may not accurately predict future performance, especially if past conditions differ significantly from future expectations. It also does not account for changes in capital structure, market conditions, or industry dynamics that could impact future growth.

Applies to:

Industries with stable and predictable cash flows, such as utilities, consumer staples, and healthcare, where long-term growth trends can be more reliably assessed.

Doesn't apply to:

Highly volatile industries, such as technology or startups, where rapid changes and innovation can lead to significant fluctuations in EBITDA, making long-term growth rates less reliable.

Summary:

The 10-year EBITDA per Share Growth Rate is a useful metric for evaluating a company's long-term profitability and operational efficiency growth. While it provides valuable insights for stable industries, its reliance on historical data and inability to account for future uncertainties limit its applicability in more volatile sectors.