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ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Employers Holdings's annualized return on capital (ROC %) for the quarter that ended in Dec. 2023 was 5.60%.
As of today (2024-04-28), Employers Holdings's WACC % is 7.57%. Employers Holdings's ROC % is 3.56% (calculated using TTM income statement data). Employers Holdings earns returns that do not match up to its cost of capital. It will destroy value as it grows.
The historical data trend for Employers Holdings's ROC % can be seen below:
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Employers Holdings Annual Data | |||||||||||||||||||||
Trend | Dec14 | Dec15 | Dec16 | Dec17 | Dec18 | Dec19 | Dec20 | Dec21 | Dec22 | Dec23 | |||||||||||
ROC % | Get a 7-Day Free Trial | 4.16 | 3.18 | 3.23 | 1.42 | 3.58 |
Employers Holdings Quarterly Data | ||||||||||||||||||||
Mar19 | Jun19 | Sep19 | Dec19 | Mar20 | Jun20 | Sep20 | Dec20 | Mar21 | Jun21 | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | |
ROC % | Get a 7-Day Free Trial | 5.53 | 2.85 | 4.12 | 1.73 | 5.60 |
Employers Holdings's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2023 is calculated as:
ROC % (A: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | EBIT * ( 1 - Tax Rate % ) | / | ( (Invested Capital (A: Dec. 2022 ) | + | Invested Capital (A: Dec. 2023 )) | / count ) |
= | 154.2 * ( 1 - 20.42% ) | / | ( (3576.275 | + | 3274.445) | / 2 ) |
= | 122.71236 | / | 3425.36 | |||
= | 3.58 % |
where
Invested Capital | (A: Dec. 2022 ) | ||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | ||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Balance Sheet Cash And Cash Equivalents | - | 5% * Revenue ) |
= | 3716.7 | - | 86.9 | - | ( 89.2 | - | 5% * 713.5 ) |
= | 3576.275 |
Invested Capital | (A: Dec. 2023 ) | ||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | ||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Balance Sheet Cash And Cash Equivalents | - | 5% * Revenue ) |
= | 3550.4 | - | 92.1 | - | ( 226.4 | - | 5% * 850.9 ) |
= | 3274.445 |
Employers Holdings's annualized Return on Capital (ROC %) for the quarter that ended in Dec. 2023 is calculated as:
ROC % (Q: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | EBIT * ( 1 - Tax Rate % ) | / | ( (Invested Capital (Q: Sep. 2023 ) | + | Invested Capital (Q: Dec. 2023 )) | / count ) |
= | 234.8 * ( 1 - 21.51% ) | / | ( (3343.275 | + | 3243.185) | / 2 ) |
= | 184.29452 | / | 3293.23 | |||
= | 5.60 % |
where
Invested Capital | (Q: Sep. 2023 ) | ||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | ||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Balance Sheet Cash And Cash Equivalents | - | 5% * Revenue ) |
= | 3527 | - | 85.1 | - | ( 108.8 | - | 5% * 203.5 ) |
= | 3343.275 |
Invested Capital | (Q: Dec. 2023 ) | ||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | ||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Balance Sheet Cash And Cash Equivalents | - | 5% * Revenue ) |
= | 3550.4 | - | 92.1 | - | ( 226.4 | - | 5% * 225.7 ) |
= | 3243.185 |
Note: The EBIT data used here is four times the quarterly (Dec. 2023) data.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Employers Holdings (NYSE:EIG) ROC % Explanation
ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. The reason book values of debt and equity are used is because the book values are the capital the company received when issuing the debt or receiving the equity investments.
There are four key components to this definition. The first is the use of operating income or EBIT rather than net income in the numerator. The second is the tax adjustment to this operating income or EBIT, computed as a hypothetical tax based on an effective or marginal tax rate. The third is the use of book values for invested capital, rather than market values. The final is the timing difference; the capital invested is from the end of the prior year whereas the operating income or EBIT is the current year's number.
Why is ROC % important?
Because it costs money to raise capital. A firm that generates higher returns on investment than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.
As of today, Employers Holdings's WACC % is 7.57%. Employers Holdings's ROC % is 3.56% (calculated using TTM income statement data). Employers Holdings earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Be Aware
Like ROE % and ROA %, ROC % is calculated with only 12 months of data. Fluctuations in the company's earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective.
Thank you for viewing the detailed overview of Employers Holdings's ROC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Katherine H. Antonello | officer: EVP, Chief Actuary | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Alejandro Perez-tenessa | director | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Michael J Mcsally | director | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Christopher Laws | officer: EVP, Chief Actuary | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Tracey Lynn Berg | officer: EVP, Chief Information Officer | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Stephen V Festa | officer: Sr VP & CCO, EICN and ECIC | 9790 GATEWAY DRIVE, SUITE 200, RENO NV 89521 |
Douglas D Dirks | director, officer: President and CEO of EIG | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
De Figueiredo Joao M | director | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
James R Kroner | director | 600 FOURTH STREET, P.O. BOX 6000, SIOUX CITY IA 51102-6000 |
Jeanne L Mockard | director | PUTNAM INVESTMENTS, ONE POST OFFICE SQUARE, BOSTON MA 02109 |
Lawrence S Rogers | officer: SVP, Chief Underwriting Office | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Richard W Blakey | director | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
John M. Mutschink | officer: SVP, Chief HR Officer | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Michael Scott Paquette | officer: EVP, Chief Financial Officer | EMPLOYERS HOLDINGS, INC., 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
Barry J. Vogt | officer: SVP, Chief Claims Officer | 10375 PROFESSIONAL CIRCLE, RENO NV 89521 |
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