Tesco (TSCDY) ROC % : 5.03% (As of Feb. 2024)

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What is Tesco 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 %. Tesco's annualized return on capital (ROC %) for the quarter that ended in Feb. 2024 was 5.03%.

As of today (2024-04-25), Tesco's WACC % is 7.04%. Tesco's ROC % is 5.26% (calculated using TTM income statement data). Tesco earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Tesco ROC % Historical Data

The historical data trend for Tesco'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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Tesco ROC % Chart

Tesco Annual Data

Trend

Feb15

Feb16

Feb17

Feb18

Feb19

Feb20

Feb21

Feb22

Feb23

Feb24

ROC %

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3.13

3.69

4.41

2.53

5.42

Tesco Semi-Annual Data
	Aug14	Feb15	Aug15	Feb16	Aug16	Feb17	Aug17	Feb18	Aug18	Feb19	Aug19	Feb20	Aug20	Feb21	Aug21	Feb22	Aug22	Feb23	Aug23	Feb24
ROC %	Get a 7-Day Free Trial															3.98	2.01	3.24	5.57	5.03

Tesco ROC % Calculation

Tesco's annualized Return on Capital (ROC %) for the fiscal year that ended in Feb. 2024 is calculated as:

	ROC % (A: Feb. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Feb. 2023 )	+	Invested Capital (A: Feb. 2024 ))	/ count )
=	3561.869 * ( 1 - 22.94% )	/	( (49886.474	+	51313.131)	/ 2 )
=	2744.7762514	/	50599.8025
=	5.42 %

where

	Invested Capital		(A: Feb. 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	))
=	55714.976	-	11879.227	-	( 5264.493	-	max(0, 21419.082	-	15368.357	+	5264.493	))
=	49886.474

	Invested Capital		(A: Feb. 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	))
=	59392.677	-	12960.859	-	( 5901.515	-	max(0, 25848.485	-	20967.172	+	5901.515	))
=	51313.131

Tesco's annualized Return on Capital (ROC %) for the quarter that ended in Feb. 2024 is calculated as:

	ROC % (Q: Feb. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Aug. 2023 )	+	Invested Capital (Q: Feb. 2024 ))	/ count )
=	3381.314 * ( 1 - 22.11% )	/	( (53316.391	+	51313.131)	/ 2 )
=	2633.7054746	/	52314.761
=	5.03 %

where

	Invested Capital		(Q: Aug. 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	))
=	60508.259	-	13529.86	-	( 7007.624	-	max(0, 24088.945	-	17750.953	+	7007.624	))
=	53316.391

	Invested Capital		(Q: Feb. 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	))
=	59392.677	-	12960.859	-	( 5901.515	-	max(0, 25848.485	-	20967.172	+	5901.515	))
=	51313.131

Note: The Operating Income data used here is two times the semi-annual (Feb. 2024) data.

Tesco (OTCPK:TSCDY) 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, Tesco's WACC % is 7.04%. Tesco's ROC % is 5.26% (calculated using TTM income statement data). Tesco 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.

Tesco ROC % Related Terms

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Tesco (TSCDY) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Defensive » Retail - Defensive » Tesco PLC (OTCPK:TSCDY) » Definitions » ROC %

Comparable Companies

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TSCDF:USA TSCOl:UK TSCO:UK TCO0:Germany TCO0:Germany TCO0:Germany TCO0:Germany

Address

Kestrel Way, Tesco House, Shire Park, Welwyn Garden, GBR, AL7 1GA

Website

https://www.tescoplc.com

Tesco is one of the largest food retailers in the world, operating thousands of stores in the United Kingdom, Ireland, and Europe. According to Kantar, Tesco is the market leader in the U.K. with a share of more than 27%, roughly double that of Asda or Sainsbury's. Tesco operates a core supermarket business in addition to convenience and neighborhood outlets. With a 35% digital market share in the U.K., the company holds a dominant position online. Tesco gained exposure to the cash-and-carry and out-of-home delivering industries with the landmark GBP 4 billion acquisition of Booker in 2018.