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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 %. Targa Resources's annualized return on capital (ROC %) for the quarter that ended in Mar. 2024 was 10.60%.
As of today (2024-05-13), Targa Resources's WACC % is 8.15%. Targa Resources's ROC % is 10.35% (calculated using TTM income statement data). Targa Resources 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 Targa Resources'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.
Targa Resources Annual Data | |||||||||||||||||||||
Trend | Dec14 | Dec15 | Dec16 | Dec17 | Dec18 | Dec19 | Dec20 | Dec21 | Dec22 | Dec23 | |||||||||||
ROC % | Get a 7-Day Free Trial | -2.61 | 6.48 | 8.84 | 9.88 | 11.38 |
Targa Resources 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 | 15.24 | 11.35 | 9.12 | 10.42 | 10.60 |
Targa Resources'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 ) |
= | 2626.2 * ( 1 - 18.7% ) | / | ( (18357.8 | + | 19151.9) | / 2 ) |
= | 2135.1006 | / | 18754.85 | |||
= | 11.38 % |
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 | )) |
= | 19560 | - | 1912.3 | - | ( 219 | - | max(0, 3066.7 | - | 2356.6 | + | 219 | )) |
= | 18357.8 |
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 | )) |
= | 20671.8 | - | 2086.2 | - | ( 141.7 | - | max(0, 2760.9 | - | 2194.6 | + | 141.7 | )) |
= | 19151.9 |
Targa Resources'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 ) |
= | 2557.6 * ( 1 - 19.91% ) | / | ( (19151.9 | + | 19496) | / 2 ) |
= | 2048.38184 | / | 19323.95 | |||
= | 10.60 % |
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 | )) |
= | 20671.8 | - | 2086.2 | - | ( 141.7 | - | max(0, 2760.9 | - | 2194.6 | + | 141.7 | )) |
= | 19151.9 |
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 | )) |
= | 20846.1 | - | 2191.6 | - | ( 109.9 | - | max(0, 2814.5 | - | 1973 | + | 109.9 | )) |
= | 19496 |
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.
Targa Resources (NYSE:TRGP) 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, Targa Resources's WACC % is 8.15%. Targa Resources's ROC % is 10.35% (calculated using TTM income statement data). Targa Resources 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 Targa Resources's ROC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Robert Muraro | officer: See Remarks | 1000 LOUISIANA, SUITE 4300, HOUSTON TX 77002 |
Julie H. Boushka | officer: Senior VP and CAO | 811 LOUISIANA, SUITE 2100, HOUSTON TX 77002 |
G Clark White | officer: EVP - Engineering & Operations | 1000 LOUISIANA STREET, SUITE 4300, HOUSTON TX 77002 |
Regina Gregory | officer: See Remarks | 2013 CITYWEST BLVD, BUILDING 4 SUITE 800, HOUSTON TX 77042 |
D. Scott Pryor | officer: See Remarks | 1000 LOUISIANA, SUITE 4300, HOUSTON TX 77002 |
Paul W Chung | officer: EVP, Gen. Counsel & Secretary | TARGA RESOURCES PARTNERS LP, 1000 LOUISIANA STREET, SUITE 4300, HOUSTON TX 77002 |
Charles R Crisp | director | 1301 MCKINNEY STE 700, HOUSTON TX 77010 |
Lindsey Cooksen | director | 811 LOUISIANA STREET, SUITE 2100, HOUSTON TX 77002 |
Rene R Joyce | director | P.O. BOX 130430, HOUSTON TX 77219-0430 |
Jennifer R. Kneale | officer: Chief Financial Officer | 811 LOUISIANA STREET, SUITE 2100, HOUSTON TX 77002 |
Joe Bob Perkins | director, officer: Chief Executive Officer | TARGA RESOURCES PARTNERS, LP, 1000 LOUISIANA ST., SUITE 4300, HOUSTON TX 77002 |
Patrick J. Mcdonie | officer: See Remarks | 110 W. 7TH STREET, SUITE 2300, TULSA OK 74119 |
Davis Waters S Iv | director | 10200 ALLIANCE ROAD, SUITE 200, CINCINNATI OH 45242 |
Redd Ershel C Jr | director | C/O EL PASO ELECTRIC COMPANY, 100 N. STANTON, EL PASO TX 79901 |
Chris Tong | director | 600 E LAS COLINAS # 1100, IRVING TX 75019 |
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