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ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Friedman Industries's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 12.83%.
As of today (2024-04-25), Friedman Industries's WACC % is 13.42%. Friedman Industries's ROIC % is 11.15% (calculated using TTM income statement data). Friedman Industries earns returns that do not match up to its cost of capital. It will destroy value as it grows.
The historical data trend for Friedman Industries's ROIC % 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.
Friedman Industries Annual Data | |||||||||||||||||||||
Trend | Mar14 | Mar15 | Mar16 | Mar17 | Mar18 | Mar19 | Mar20 | Mar21 | Mar22 | Mar23 | |||||||||||
ROIC % | Get a 7-Day Free Trial | 9.33 | -3.38 | 19.50 | 24.08 | 11.81 |
Friedman Industries Quarterly Data | ||||||||||||||||||||
Mar19 | Jun19 | Sep19 | Dec19 | Mar20 | Jun20 | Sep20 | Dec20 | Mar21 | Jun21 | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | |
ROIC % | Get a 7-Day Free Trial | 2.89 | 13.71 | 19.05 | 1.79 | 12.83 |
For the Steel subindustry, Friedman Industries's ROIC %, along with its competitors' market caps and ROIC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
For the Steel industry and Basic Materials sector, Friedman Industries's ROIC % distribution charts can be found below:
* The bar in red indicates where Friedman Industries's ROIC % falls into.
Friedman Industries's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Mar. 2023 is calculated as:
ROIC % (A: Mar. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (A: Mar. 2022 ) | + | Invested Capital (A: Mar. 2023 )) | / count ) |
= | 21.074 * ( 1 - 24.28% ) | / | ( (111.736 | + | 158.551) | / 2 ) |
= | 15.9572328 | / | 135.1435 | |||
= | 11.81 % |
where
Invested Capital | (A: Mar. 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 | )) |
= | 159.275 | - | 44.941 | - | ( 2.598 | - | max(0, 60.811 | - | 125.362 | + | 2.598 | )) |
= | 111.736 |
Invested Capital | (A: Mar. 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 | )) |
= | 199.312 | - | 37.769 | - | ( 2.992 | - | max(0, 45.088 | - | 143.656 | + | 2.992 | )) |
= | 158.551 |
Friedman Industries's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Dec. 2023 is calculated as:
ROIC % (Q: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (Q: Sep. 2023 ) | + | Invested Capital (Q: Dec. 2023 )) | / count ) |
= | 24.692 * ( 1 - 5.88% ) | / | ( (187.511 | + | 174.763) | / 2 ) |
= | 23.2401104 | / | 181.137 | |||
= | 12.83 % |
where
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 | )) |
= | 222.127 | - | 31.464 | - | ( 3.152 | - | max(0, 35.292 | - | 165.162 | + | 3.152 | )) |
= | 187.511 |
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 | )) |
= | 228.955 | - | 50.183 | - | ( 4.009 | - | max(0, 54.601 | - | 170.897 | + | 4.009 | )) |
= | 174.763 |
Note: The Operating Income data used here is four times the quarterly (Dec. 2023) 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.
Friedman Industries (AMEX:FRD) ROIC % Explanation
ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. 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 ROIC % 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, Friedman Industries's WACC % is 13.42%. Friedman Industries's ROIC % is 11.15% (calculated using TTM income statement data).
Be Aware
Like ROE % and ROA %, ROIC % 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 Friedman Industries's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Max Alan Reichenthal | director | 865 LOCKWOOD DRIVE, HOUSTON TX 77020 |
Joel Spira | director | THREE GREENWAY PLAZA, SUITE 1750, HOUSTON TX 77046 |
Mike J Taylor | director | P.O. BOX 2192, LONGVIEW TX 75606 |
Sharon L Taylor | director | 4200 B STONE RD, KILGORE TX 75662 |
Alex Larue | officer: VP - Secretary & Treasurer | 7 PEBBLE CREEK DRIVE NORTH, LONGVIEW TX 75605 |
Durga D Agrawal | director | 2921 UNIVERSITY BLVD, HOUSTON TX 77005 |
Sandra Kay Scott | director | 11503 BISTRO LANE, HOUSTON TX 77082 |
Joe L Williams | director | P.O. BOX 1587, HOUSTON TX 77251 |
Tim Scott Stevenson | director | PO BOX 2192, LONGVIEW TX 75606 |
Robert Sparkman | officer: President & COO | P.O. BOX 2192, LONGVIEW TX 75605 |
Charles W Hall | director | 1301 MCKINNEY STE 5100, HOUSTON TX 77010 |
Benny Harper | officer: Sr. VP-Finance | 1301 MCKINNEY STE 5100, HOUSTON TX 77010 |
William E Crow | director, officer: President and CEO | P.O. BOX 1587, HOUSTON TX 77251 |
Hershel M Rich | director | P.O. BOX 1587, HOUSTON TX 77251 |
Harold Friedman | director, 10 percent owner, officer: Vice Chairman of the Board | 4001 HOMESTEAD ROAF, HOUSTON TX 77028 |
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