This section is similar to the other growth rate section
however this one measures the growth across 4 years, and is
calculated rather differently:
Avg 4 yr growth rate
= (% change in year 2 + yr 3 + yr 4) divided by 3
It is a simple average of the % changes across the 4 years, it just
gives a broad indication of % change, the other metric however is
perhaps more appropriate;
Cmpdg 4 yr growth rate
= (figure in year 4 divided by figure in year 1) to
the power of 1divided by 4) minus 1 i.e. [(y4/y1)^(1/4)-1]
This is the compounding growth rate, i.e. if the figure in year one
grows at this rate compounding each year then it will end up as the
figure in year 4.
So in essence they are two different ways of
indicating growth rates over the last 4 years, and while they could
be applied going forward to get some kind of indication of future
potential… they are backward looking i.e. the past does not equal
the future. If you are trying to assess future growth rates you need
to factor in other variables such as growth prospects, industry and
economic conditions, competitor analysis, investment projects, brand
values, marketing strategy etc!
In other words while they can be useful, just be
careful, and make sure your analysis doesn’t rely on one variable!
Avg 4 yr growth rate (NPAT)
Average growth rate across the years of NPAT (Net Profit After
Tax). Simply the growth (or otherwise) of net profit across the
years, ideally it should be growing…
Cmpdg 4 yr growth rate (NPAT)
Compounding 4 year growth rate of NPAT.
Avg 4 yr growth rate (NA)
Average growth rate across the years of NA (Net Assets or
Equity), Simply the growth (or otherwise) of net assets across
the years, as mentioned in a previous section this is a proxy
for shareholder wealth so positive growth rates would be good.
Cmpdg
4 yr growth rate (NA)
Compounding 4 year growth rate of net assets.
