ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Lonza Group's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 2.92%.
As of today (2024-04-27), Lonza Group's WACC % is 11.63%. Lonza Group's ROIC % is 4.88% (calculated using TTM income statement data).
Lonza Group earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Lonza Group ROIC % Historical Data
The historical data trend for Lonza Group'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.
For the Diagnostics & Research subindustry, Lonza Group'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.
Lonza Group's ROIC % Distribution in the Medical Diagnostics & Research Industry
For the Medical Diagnostics & Research industry and Healthcare sector, Lonza Group's ROIC % distribution charts can be found below:
* The bar in red indicates where Lonza Group's ROIC % falls into.
Lonza Group ROIC % Calculation
Lonza Group's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:
Note:
The Operating Income data used here is two times the semi-annual (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.
Lonza Group (OTCPK:LZAGY) 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, Lonza Group's WACC % is 11.63%. Lonza Group's ROIC % is 4.88% (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.
Lonza Group ROIC % Related Terms
Thank you for viewing the detailed overview of Lonza Group's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Lonza Group is a contract development and manufacturing organization, or CDMO. It operates under four segments: small molecules, biologics, cell & gene, and capsules & health ingredients. Lonza derives its revenue primarily from long-term supply agreements with pharmaceutical customers. The company provides a range of development and manufacturing services throughout the entire lifecycle of a product from drug research to commercial supply. The majority of Lonza's customers are pharmaceutical and biotechnology companies, academic institutions, and government research organizations.
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