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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 %. Encore Wire's annualized return on capital (ROC %) for the quarter that ended in Mar. 2024 was 18.09%.
As of today (2024-05-13), Encore Wire's WACC % is 12.84%. Encore Wire's ROC % is 23.59% (calculated using TTM income statement data). Encore Wire generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.
The historical data trend for Encore Wire'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.
Encore Wire Annual Data | |||||||||||||||||||||
Trend | Dec14 | Dec15 | Dec16 | Dec17 | Dec18 | Dec19 | Dec20 | Dec21 | Dec22 | Dec23 | |||||||||||
ROC % | Get a 7-Day Free Trial | 9.58 | 11.78 | 65.42 | 66.88 | 28.50 |
Encore Wire Quarterly Data | ||||||||||||||||||||
Jun19 | Sep19 | Dec19 | Mar20 | Jun20 | Sep20 | Dec20 | Mar21 | Jun21 | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | Mar24 | |
ROC % | Get a 7-Day Free Trial | 38.25 | 33.01 | 24.59 | 19.17 | 18.09 |
Encore Wire'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 | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (A: Dec. 2022 ) | + | Invested Capital (A: Dec. 2023 )) | / count ) |
= | 451.373 * ( 1 - 23.16% ) | / | ( (1164.296 | + | 1269.321) | / 2 ) |
= | 346.8350132 | / | 1216.8085 | |||
= | 28.50 % |
where
Invested Capital | (A: Dec. 2022 ) | |||||||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | |||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Cash, Cash Equivalents, Marketable Securities | - | max(0, Total Current Liabilities | - | Total Current Assets | + | Cash, Cash Equivalents, Marketable Securities | )) |
= | 2018.732 | - | 123.879 | - | ( 730.557 | - | max(0, 144.161 | - | 1401.641 | + | 730.557 | )) |
= | 1164.296 |
Invested Capital | (A: Dec. 2023 ) | |||||||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | |||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Cash, Cash Equivalents, Marketable Securities | - | max(0, Total Current Liabilities | - | Total Current Assets | + | Cash, Cash Equivalents, Marketable Securities | )) |
= | 1967.912 | - | 137.956 | - | ( 560.635 | - | max(0, 160.138 | - | 1210.575 | + | 560.635 | )) |
= | 1269.321 |
Encore Wire's annualized Return on Capital (ROC %) for the quarter that ended in Mar. 2024 is calculated as:
ROC % (Q: Mar. 2024 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (Q: Dec. 2023 ) | + | Invested Capital (Q: Mar. 2024 )) | / count ) |
= | 299.604 * ( 1 - 23.05% ) | / | ( (1269.321 | + | 1279.04) | / 2 ) |
= | 230.545278 | / | 1274.1805 | |||
= | 18.09 % |
where
Invested Capital | (Q: Dec. 2023 ) | |||||||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | |||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Cash, Cash Equivalents, Marketable Securities | - | max(0, Total Current Liabilities | - | Total Current Assets | + | Cash, Cash Equivalents, Marketable Securities | )) |
= | 1967.912 | - | 137.956 | - | ( 560.635 | - | max(0, 160.138 | - | 1210.575 | + | 560.635 | )) |
= | 1269.321 |
Invested Capital | (Q: Mar. 2024 ) | |||||||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | Excess Cash | |||||||
= | Total Assets | - | Accounts Payable & Accrued Expense | - | ( Cash, Cash Equivalents, Marketable Securities | - | max(0, Total Current Liabilities | - | Total Current Assets | + | Cash, Cash Equivalents, Marketable Securities | )) |
= | 2041.54 | - | 148.412 | - | ( 614.088 | - | max(0, 168.407 | - | 1262.154 | + | 614.088 | )) |
= | 1279.04 |
Note: The Operating Income data used here is four times the quarterly (Mar. 2024) 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.
Encore Wire (NAS:WIRE) 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, Encore Wire's WACC % is 12.84%. Encore Wire's ROC % is 23.59% (calculated using TTM income statement data). Encore Wire generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.
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 Encore Wire's ROC % provided by GuruFocus.com. Please click on the following links to see related term pages.
William Kelvin Walker | director | 1329 MILLWOOD ROAD, MCKINNEY TX 75069 |
Matthew D. Ford | officer: Controller | 1329 MILLWOOD ROAD, MCKINNEY TX 75069 |
Daniel L Jones | director, officer: Chairman, President & CEO | 1410 MILLWOOD RD, C/O ENCORE WIRE CORP, MCKINNEY TX 75069 |
Bret J Eckert | officer: Vice President - Finance & CFO | P O BOX 650205, DALLAS TX 75265 |
Gregory J Fisher | director | 14643 DALLAS PAKWAY, STE 1000, DALLAS TX 75254-8890 |
Scott D Weaver | director | C/O WESTERN REFINING, INC., 6500 TROWBRIDGE DRIVE, EL PASO TX 79905 |
Thomas William R Iii | director | 12900 PRESTON ROAD, SUITE 700, DALLAS TX 75230 |
John H Wilson | director | 12900 PRESTON RD, STE 700, DALLAS TX 75230 |
Gina A. Norris | director | 1329 MILLWOOD ROAD, MCKINNEY TX 75069 |
Frank J Bilban | officer: Vice President - Finance & CFO | 1410 MILLWOOD RD, C/O ENCORE WIRE CORP, MCKINNEY TX 75069 |
Donald Eugene Courtney | director | |
Capital Southwest Corp | director | 8333 DOUGLAS AVE, SUITE 1100, DALLAS TX 75225 |
Norman R Medlen | officer: Controller | 1410 MILLWOOD RD, C/O ENCORE WIRE CORP, MCKINNEY TX 75069 |
Cunningham Thomas Lee Iii | director | |
Joseph M Brito | director | 1410 MILLWOOD RD, C/O ENCORE WIRE CORP, MCKINNEY TX 75069 |
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