Software AG (Software AG) ROC % : 2.63% (As of Sep. 2023)

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What is Software AG ROC %?

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Software AG's annualized return on capital (ROC %) for the quarter that ended in Sep. 2023 was 2.63%.

As of today (2024-04-28), Software AG's WACC % is 1.37%. Software AG's ROC % is 1.20% (calculated using TTM income statement data). Software AG earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Software AG ROC % Historical Data

The historical data trend for Software AG'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.

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Software AG ROC % Chart

Software AG Annual Data

Trend

Dec13

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

ROC %

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9.15

8.90

6.31

5.26

1.43

Software AG Quarterly Data
	Dec18	Mar19	Jun19	Sep19	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23
ROC %	Get a 7-Day Free Trial															0.88	-2.30	0.90	1.61	2.63

Software AG ROC % Calculation

Software AG's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2022 is calculated as:

	ROC % (A: Dec. 2022 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2021 )	+	Invested Capital (A: Dec. 2022 ))	/ count )
=	106.353 * ( 1 - 70.44% )	/	( (1976.073	+	2410.041)	/ 2 )
=	31.4379468	/	2193.057
=	1.43 %

where

	Invested Capital		(A: Dec. 2021 )
=	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	))
=	2510.045	-	100.032	-	( 684.707	-	max(0, 554.668	-	988.608	+	684.707	))
=	1976.073

	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	))
=	2837.293	-	93.245	-	( 454.808	-	max(0, 481.615	-	815.622	+	454.808	))
=	2410.041

Software AG's annualized Return on Capital (ROC %) for the quarter that ended in Sep. 2023 is calculated as:

	ROC % (Q: Sep. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Jun. 2023 )	+	Invested Capital (Q: Sep. 2023 ))	/ count )
=	149.116 * ( 1 - 54.92% )	/	( (2493.026	+	2621.395)	/ 2 )
=	67.2214928	/	2557.2105
=	2.63 %

where

	Invested Capital		(Q: Jun. 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	))
=	2812.22	-	94.898	-	( 423.689	-	max(0, 557.197	-	781.493	+	423.689	))
=	2493.026

	Invested Capital		(Q: Sep. 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	))
=	2760.211	-	67.191	-	( 433.933	-	max(0, 716.026	-	787.651	+	433.933	))
=	2621.395

Note: The Operating Income data used here is four times the quarterly (Sep. 2023) data.

Software AG (OTCPK:STWRY) 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, Software AG's WACC % is 1.37%. Software AG's ROC % is 1.20% (calculated using TTM income statement data). Software AG 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.

Software AG ROC % Related Terms

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Software AG (Software AG) Business Description

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Comparable Companies

Traded in Other Exchanges

SWDAF:USA 0RUL:UK SOW:Germany

Address

Uhlandstrasse 12, Darmstadt, HE, DEU, 64297

Website

https://www.softwareag.com

Software AG is a Germany-based provider of software solutions for the banking, communication and media, local and federal government, energy, insurance, transportation, retail, and manufacturing end markets. Its services include business process management, portfolio management, risk and compliance management, operational intelligence, and streaming analytics, many of which are delivered via cloud-based software applications. The firm has operations in Germany; the USA and other countries.