ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Echo Trading Co's annualized return on invested capital (ROIC %) for the quarter that ended in Nov. 2023 was 8.97%.
As of today (2024-05-12), Echo Trading Co's WACC % is 4.45%. Echo Trading Co's ROIC % is 9.85% (calculated using TTM income statement data).
Echo Trading Co 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.
Echo Trading Co ROIC % Historical Data
The historical data trend for Echo Trading Co's ROIC % 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.
Competitive Comparison of Echo Trading Co's ROIC %
For the Packaged Foods subindustry, Echo Trading Co's ROIC %, along with its competitors' market caps and ROIC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Echo Trading Co's ROIC % Distribution in the Consumer Packaged Goods Industry
For the Consumer Packaged Goods industry and Consumer Defensive sector, Echo Trading Co's ROIC % distribution charts can be found below:
* The bar in red indicates where Echo Trading Co's ROIC % falls into.
Echo Trading Co ROIC % Calculation
Echo Trading Co's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Feb. 2023 is calculated as:
Note:
The Operating Income data used here is four times the quarterly (Nov. 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.
Echo Trading Co (TSE:7427) ROIC % Explanation
ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. 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 ROIC % 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, Echo Trading Co's WACC % is 4.45%. Echo Trading Co's ROIC % is 9.85% (calculated using TTM income statement data).
Echo Trading Co 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.
Echo Trading Co 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 %, ROIC % 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.
Echo Trading Co ROIC % Related Terms
Thank you for viewing the detailed overview of Echo Trading Co's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Echo Trading Co Ltd is a Japan-based company offering diversified products and services for pets. The company is engaged in specialty store business, wholesale business, product development business, education business, sales promotion business, event business, and internet business. Its specialty store business, wholesale business, and product development business are engaged in the production and distribution of pet food and pet supplies to pet home centers, supermarkets, and drug stores. Its internet business transmits information useful for pet owners and pet lives such as searching for pet-related facilities such as animal hospitals and trimming salons, and travel knowledge on pets.
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