Definition:

The 10-year Tangible Book Value per Share Growth Rate measures the annualized rate at which a company's tangible book value per share has grown over a ten-year period. Tangible book value is the net asset value of a company excluding intangible assets like goodwill and patents.

Formula:

((Tangible Book Value per Share at End of Period / Tangible Book Value per Share at Start of Period) ^ (1/10)) - 1

How to use the metric:

Investors use this metric to assess a company's ability to grow its tangible assets over a long period, which can indicate financial health and operational efficiency. A consistent growth rate suggests a company is effectively managing its tangible assets and generating value for shareholders.

Limitations:

This metric does not account for intangible assets, which can be significant for companies in industries where intellectual property is crucial. It also does not consider external factors like market conditions or industry changes that might affect growth. Additionally, it is backward-looking and may not reflect future performance.

Applies to:

This metric works best in asset-heavy industries such as manufacturing, utilities, and real estate, where tangible assets are a significant part of the company's value.

Doesn't apply to:

It does not apply well to industries like technology or pharmaceuticals, where intangible assets such as patents and software are more critical to the company's value. In these industries, focusing solely on tangible assets might provide an incomplete picture of the company's worth.

Summary:

The 10-year Tangible Book Value per Share Growth Rate is a useful metric for evaluating the growth of a company's tangible assets over a decade. While it provides insights into asset-heavy industries, it may not be suitable for sectors where intangible assets play a significant role. Investors should consider this metric alongside other financial indicators to get a comprehensive view of a company's performance.