Definition:

The 10-year EPS Growth Rate Without NRI measures the compound annual growth rate (CAGR) of a company's earnings per share (EPS) over a ten-year period, excluding non-recurring items (NRI). Non-recurring items are unusual or infrequent gains or losses that are not expected to occur regularly.

Formula:

CAGR = [(EPS at End of Period / EPS at Start of Period) ^ (1 / Number of Years)] - 1

How to use the metric:

This metric is used to evaluate a company's long-term profitability and growth potential by focusing on its core earnings, excluding any one-time events that might distort the true performance. Investors use this to assess the consistency and sustainability of a company's earnings growth over a decade.

Limitations:

The metric may not accurately reflect recent changes in a company's business model or market conditions, as it averages growth over a long period. It also excludes non-recurring items, which might sometimes provide valuable insights into a company's financial health.

Applies to:

This metric works best in stable industries with predictable earnings, such as consumer staples, utilities, and healthcare, where long-term growth trends are more consistent.

Doesn't apply to:

It may not be suitable for industries with high volatility or rapid innovation, such as technology or biotech, where earnings can fluctuate significantly due to market dynamics or R&D breakthroughs.

Summary:

The 10-year EPS Growth Rate Without NRI is a valuable tool for assessing a company's long-term earnings growth by focusing on core operations and excluding one-time events. While useful in stable industries, it may not capture the full picture in more dynamic sectors.