Definition:

The 5-year Revenue per Share Growth Rate measures the annualized growth rate of a company's revenue per share over a five-year period. It provides insight into how effectively a company is increasing its revenue relative to its number of shares outstanding.

Formula:

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

How to use the metric:

Investors use this metric to assess a company's ability to grow its revenue on a per-share basis over time. A higher growth rate indicates strong performance and potential for future profitability, making it a useful tool for evaluating long-term investment opportunities.

Limitations:

The metric does not account for changes in share count due to stock splits, buybacks, or issuance, which can affect the revenue per share calculation. It also does not consider profitability or cost efficiency, focusing solely on revenue growth.

Applies to:

This metric is applicable across various industries, particularly those with stable revenue streams and predictable growth patterns, such as consumer goods, technology, and healthcare.

Doesn't apply to:

Industries with highly volatile revenues or those heavily influenced by external factors, such as commodities or cyclical industries, may not find this metric as useful due to the inherent unpredictability in revenue growth.

Summary:

The 5-year Revenue per Share Growth Rate is a valuable metric for evaluating a company's revenue growth efficiency on a per-share basis over a medium-term period. While it provides insights into growth potential, it should be used alongside other financial metrics to gain a comprehensive understanding of a company's financial health and performance.