Definition:

The 3-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 three-year period. Tangible book value per share is calculated by subtracting intangible assets (like goodwill) from the company's total book value and dividing by the number of outstanding shares.

Formula:

((Tangible Book Value per Share at End of Period / Tangible Book Value per Share at Start of Period) ^ (1/3)) - 1

How to use the metric:

Investors use this metric to assess a company's ability to increase its tangible book value per share over time, which can indicate financial health and potential for future growth. A higher growth rate suggests that the company is effectively managing its assets and liabilities to increase shareholder value.

Limitations:

This metric does not account for changes in market conditions or industry-specific factors that might affect a company's tangible book value. It also excludes intangible assets, which can be significant for companies in industries where intellectual property or brand value is crucial.

Applies to:

Industries with significant tangible assets, such as manufacturing, utilities, and real estate, where tangible book value is a relevant measure of company value.

Doesn't apply to:

Industries heavily reliant on intangible assets, such as technology and pharmaceuticals, where intellectual property and brand value are critical components of company value. In these sectors, focusing solely on tangible book value might provide an incomplete picture of a company's worth.

Summary:

The 3-year Tangible Book Value per Share Growth Rate is a useful metric for evaluating a company's ability to grow its tangible asset base relative to its shares over a specified period. While it provides insights into financial health and asset management, it may not fully capture the value of companies with significant intangible assets.