Switch to:
Kratos Defense & Security Solutions Inc (NAS:KTOS)
Return on Capital (Joel Greenblatt)
9.00% (As of Jun. 2014)

Joel Greenblatt defined Return on Capital differently in his book The Little Book That Still Beats the Market (Little Books. Big Profits). He defines Return on Capital as EBIT divided by the total of net fixed assets and net working capital. Kratos Defense & Security Solutions Inc's annualized return on capital (Joel Greenblatt) for the quarter that ended in Jun. 2014 was 9.00%.

KTOS' s 10-Year Return on Capital - Joel Greenblatt Range
Min: -212.79   Max: 101.9
Current: 9.33

-212.79
101.9

During the past 13 years, Kratos Defense & Security Solutions Inc's highest Return on Capital (Joel Greenblatt) was 101.90%. The lowest was -212.79%. And the median was 7.76%.

KTOS's Return on Capital - Joel Greenblattis ranked higher than
63% of the 245 Companies
in the Global Security & Protection Services industry.

( Industry Median: 12.03 vs. KTOS: 9.33 )

Kratos Defense & Security Solutions Inc's 3-Year average Growth Rate of Return on Capital (Joel Greenblatt) was 0.00% per year.


Definition

Joel Greenblatt defined Return on Capital differently in his book The Little Book That Still Beats the Market (Little Books. Big Profits) . He defines Return on Capital as follows:

Return on Capital=EBIT/(Net fixed Assets + Net Working Capital)

EBIT stands for Earnings Before Interest and Taxes. It is also called operating income.

Fixed Assets are also known as non-current assets. They include the property, plant, and equipment that the firm needs in its operation.

GuruFocus calculates net working capital as: (Accounts Receivable + Inventory + Other Current Assets) - (Accounts Payable + Other Current Liabilities). We're trying to account for OPERATING assets and liabilities (part of daily business) when calculating working capital. Cash and marketable securities are considered NON-OPERATING assets and are not included in calculation. We will also back out all interest bearing debt, short term debt and the portion of long term debt that is due in the current period from the current liabilities. This debt will be considered when computing cost of capital and it would be inappropriate to count it twice.

Working Capital(Q: Jun. 2014 )
=(Accounts Receivable + Inventory + Other Current Assets) - (Accounts Payable + Other Current Liabilities)
=(265.9 + 78.5 + 27.2) - (204.5 + 42.4)
=124.7

When net working capital is negative, 0 is used.

So Joel Greenblatt’s Return on Capital of Kratos Defense & Security Solutions Inc for the quarter that ended in Jun. 2014 can be restated as:

Return on Capital (Joel Greenblatt’s)(Q: Jun. 2014 )
=EBIT/(Net fixed Assets + Net Working Capital)
=Operating Income/(Net Property, Plant and Equipment+Net Working Capital)
=18.8/(84.2 + max(124.7, 0))
=9.00 %

Note: The Operating Income data used here is four times the quarterly (Jun. 2014) operating income data.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.


Explanation

The way Joel Greenblatt defines Return on Capital is a more accurate measure of how efficiently the company generates returns onthe capital actually invested in the business. EBIT is used instead of net income because the tax and interest payment may be affected by factors other than the core business operation. Intangible assets are not included in the calculation because they don’t need to be replaced.

Joel Greenblatt uses his definition of Return on Capital and Earnings Yield (Joel Greenblatt) to rank companies.


Related Terms

Operating Income, Net Property, Plant and Equipment, Accounts Receivable, Inventory, Other Current Assets, Accounts Payable, Other Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Kratos Defense & Security Solutions Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
ROC_JOEL 11.134.39-65.22-100.82-212.79-74.5927.5013.93-23.1515.16

Kratos Defense & Security Solutions Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
ROC_JOEL 17.5213.1624.56-149.6021.7216.7211.7610.326.609.00
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK