Definition:

The 5-year Revenue Growth Rate measures the annualized percentage increase in a company's revenue over a five-year period. It provides insight into the company's ability to expand its sales and grow its business over a medium-term horizon.

Formula:

((Revenue at End of Period / Revenue at Start of Period) ^ (1/5)) - 1

How to use the metric:

Investors and analysts use the 5-year Revenue Growth Rate to assess a company's historical growth performance and to compare it with peers in the industry. A higher growth rate may indicate a competitive advantage or successful expansion strategies.

Limitations:

The metric does not account for fluctuations in revenue due to economic cycles, one-time events, or changes in accounting practices. It also does not provide insights into profitability or operational efficiency.

Applies to:

This metric is particularly useful in industries with stable revenue streams and predictable growth patterns, such as consumer goods, technology, and healthcare.

Doesn't apply to:

Industries with highly volatile revenues, such as commodities or cyclical sectors, may not find this metric as useful due to the inherent revenue fluctuations that can distort growth rates.

Summary:

The 5-year Revenue Growth Rate is a valuable tool for evaluating a company's historical revenue expansion, offering insights into its growth trajectory and competitive positioning. However, it should be used in conjunction with other financial metrics to gain a comprehensive understanding of a company's performance.