Definition:

The 3-year EBITDA per Share Growth Rate measures the annualized rate at which a company's EBITDA per share has grown over a three-year period. It provides insight into the company's profitability growth on a per-share basis, accounting for changes in both EBITDA and the number of shares outstanding.

Formula:

((EBITDA per Share at End of Period / EBITDA per Share at Start of Period) ^ (1/3)) - 1

How to use the metric:

This metric is used by investors and analysts to assess the growth trajectory of a company's profitability on a per-share basis over a medium-term period. A higher growth rate indicates strong performance and potential for future earnings growth, making the company more attractive to investors.

Limitations:

The metric does not account for one-time events or cyclical fluctuations that may affect EBITDA. It also does not consider changes in capital structure or the impact of share buybacks and issuances. Additionally, it may not be comparable across different industries due to varying capital intensity and business models.

Applies to:

This metric works best in industries with relatively stable and predictable earnings, such as consumer goods, healthcare, and technology, where EBITDA is a reliable measure of operating performance.

Doesn't apply to:

Industries with highly volatile earnings, such as commodities or financial services, may not find this metric as useful due to the significant fluctuations in EBITDA that can occur due to external factors like commodity prices or interest rates.

Summary:

The 3-year EBITDA per Share Growth Rate is a valuable tool for evaluating a company's profitability growth on a per-share basis over a medium-term period. While useful in assessing performance, it should be used in conjunction with other financial metrics and industry-specific considerations to provide a comprehensive view of a company's financial health.