Definition:

The 3-year EPS Growth Rate Without NRI measures the compound annual growth rate of a company's earnings per share (EPS) over a three-year period, excluding non-recurring items (NRI). This metric provides insight into the company's ability to grow its earnings sustainably over time, without the influence of one-time events.

Formula:

3-year EPS Growth Rate Without NRI = [(EPS in Year 3 - NRI) / (EPS in Year 0 - NRI)]^(1/3) - 1

How to use the metric:

Investors use this metric to assess a company's consistent earnings growth, which can indicate financial health and potential for future performance. It helps in comparing companies within the same industry by focusing on core earnings growth.

Limitations:

This metric excludes non-recurring items, which might sometimes include significant gains or losses that could affect the overall financial picture. It also assumes that past growth rates will continue, which may not always be the case.

Applies to:

This metric works best in industries with stable and predictable earnings, such as consumer staples, utilities, and healthcare, where non-recurring items are less frequent.

Doesn't apply to:

Industries with volatile earnings, such as technology or mining, may not benefit as much from this metric due to frequent non-recurring items and fluctuating earnings, which can distort the growth rate.

Summary:

The 3-year EPS Growth Rate Without NRI is a useful tool for evaluating a company's core earnings growth over time, excluding one-time events. While it provides valuable insights into a company's financial health, it should be used alongside other metrics to get a comprehensive view of a company's performance.