Definition:

The 3-year Revenue per Share Growth Rate measures the annualized percentage increase in a company's revenue per share over a three-year period. It provides insight into how effectively a company is growing its revenue relative to its outstanding shares.

Formula:

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

How to use the metric:

Investors use this metric to evaluate a company's growth performance over a medium-term period. A higher growth rate indicates that the company is successfully increasing its revenue on a per-share basis, which can be a positive signal for potential investors.

Limitations:

This metric does not account for changes in the number of shares outstanding, which can affect the revenue per share. It also does not consider profitability or cost management, focusing solely on revenue growth. Additionally, it may not be meaningful for companies with volatile or cyclical revenues.

Applies to:

This metric works best in industries where revenue growth is a key performance indicator, such as technology, consumer goods, and healthcare, where companies often focus on expanding their market share and increasing sales.

Doesn't apply to:

Industries with stable or regulated revenue streams, such as utilities or telecommunications, may not find this metric as relevant. In these sectors, revenue growth is often limited by external factors, and other metrics like dividend yield or return on equity might be more appropriate.

Summary:

The 3-year Revenue per Share Growth Rate is a useful metric for assessing a company's ability to grow its revenue relative to its share count over a medium-term period. While it provides valuable insights into growth potential, it should be used alongside other financial metrics to get a comprehensive view of a company's financial health and performance.