Definition:

The 5-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 five-year period. Tangible book value per share is calculated by subtracting intangible assets and liabilities from total assets 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) ^ (1/5)) - 1

How to use the metric:

This metric is used by investors to assess a company's ability to grow its tangible assets on a per-share basis over time. A higher growth rate indicates a company's effectiveness in increasing its tangible book value, which can be a sign of financial health and efficient management.

Limitations:

The metric does not account for intangible assets, which can be significant for companies in industries like technology or pharmaceuticals. It also does not consider external factors such as market conditions that might affect the tangible book value. Additionally, it may not be relevant for companies that do not have significant tangible assets.

Applies to:

This metric works best in asset-heavy industries such as manufacturing, utilities, and real estate, where tangible assets are a significant part of the company's value.

Doesn't apply to:

It does not apply well to industries with high intangible assets, such as technology, pharmaceuticals, and service-based industries, because these companies derive much of their value from intangible assets like intellectual property and brand value.

Summary:

The 5-year Tangible Book Value per Share Growth Rate is a useful metric for evaluating the growth of a company's tangible assets on a per-share basis over a five-year period. While it provides insights into a company's financial health and management efficiency, it is less applicable to industries where intangible assets are predominant.