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Nu Skin Enterprises Inc (NYSE:NUS)
Return on Capital (Joel Greenblatt)
64.38% (As of Sep. 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. Nu Skin Enterprises Inc's annualized return on capital (Joel Greenblatt) for the quarter that ended in Sep. 2014 was 64.38%.

NUS' s 10-Year Return on Capital - Joel Greenblatt Range
Min: 53.34   Max: 3080.9
Current: 86.73

53.34
3080.9

During the past 13 years, Nu Skin Enterprises Inc's highest Return on Capital (Joel Greenblatt) was 3080.90%. The lowest was 53.34%. And the median was 127.49%.

NUS's Return on Capital - Joel Greenblattis ranked higher than
98% of the 1672 Companies
in the Global Household & Personal Products industry.

( Industry Median: 13.64 vs. NUS: 86.73 )

Nu Skin Enterprises Inc's 3-Year average Growth Rate of Return on Capital (Joel Greenblatt) was 10.30% 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/Average of (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 + Deferred Revenue + 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 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(41.712 + 389.65 + 180.957) - (418.848 + 0 + 5.68434188608E-14)
=193.471

Working Capital(Q: Sep. 2014 )
=(Accts Rec. + Inventory + Other Curr. Ass.) - (Accts Pay. + Defer. Rev. + Other Curr. Liab.)
=(40.612 + 369.107 + 188.532) - (357.248 + 0 + 0)
=241.003

When net working capital is negative, 0 is used.

So Joel Greenblatt’s Return on Capital of Nu Skin Enterprises Inc for the quarter that ended in Sep. 2014 can be restated as:

ROC (Joel Greenblatt’s)(Q: Sep. 2014 )
=EBIT/Average of (Net fixed Assets + Net Working Capital)
=Operating Income/Average of (Net PPE+Net Working Capital)
     Q: Jun. 2014  Q: Sep. 2014
=Operating Income/( ( (Net PPE + Net Working Capital) + (Net PPE + Net Working Capital) )/2 )
=419.824/( ( (429.332 + max(193.471, 0)) + (440.352 + max(241.003, 0)) )/2 )
=419.824/( ( 622.803 + 681.355 )/2 )
=419.824/652.079
=64.38 %

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

Nu Skin Enterprises Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
ROC_JOEL 127.31125.0953.3463.54102.57127.66175.92151.09169.63177.08

Nu Skin Enterprises Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
ROC_JOEL 208.64180.96167.58133.82161.11204.80201.5086.6337.7164.38
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