Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. A.O. Smith's forward rate of return for was 2.09%.
The historical rank and industry rank for A.O. Smith's Forward Rate of Return (Yacktman) % or its related term are showing as below:
AOS'
s Forward Rate of Return (Yacktman) % Range Over the Past 10 Years
Min: -0.83 Med: 17.78 Max: 23.34
Current: 1.87
During the past 13 years, A.O. Smith's highest Forward Rate of Return was 23.34. The lowest was -0.83. And the median was 17.78.
AOS's Forward Rate of Return (Yacktman) % is ranked worse than 65.63% of 1923
companies
in the Industrial Products industry
Industry Median: 8.98
vs AOS: 1.87
Unlike the Earnings Yield %, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
A.O. Smith Forward Rate of Return (Yacktman) % Historical Data
The historical data trend for A.O. Smith's Forward Rate of Return (Yacktman) % 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 Specialty Industrial Machinery subindustry, A.O. Smith's Forward Rate of Return (Yacktman) %, along with its competitors' market caps and Forward Rate of Return (Yacktman) % 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.
A.O. Smith Forward Rate of Return (Yacktman) % Distribution
For the Industrial Products industry and Industrials sector, A.O. Smith's Forward Rate of Return (Yacktman) % distribution charts can be found below:
* The bar in red indicates where A.O. Smith's Forward Rate of Return (Yacktman) % falls into.
A.O. Smith Forward Rate of Return (Yacktman) % Calculation
Forward Rate of Return is a concept that Don Yacktman uses in his investment approach. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. He said in the interview (March 2012, when the S&P 500 was at about 1400):
If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.
The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).
A.O. Smith's Forward Rate of Return of Dec. 2023 is
Forward Rate of Return
=
Normalized Free Cash Flow
/
Price
+
5-Year EBITDA Growth Rate
=
3.01219048
/
82.44
+
-0.0156
=
2.09 %
* 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.
A.O. Smith (NYSE:AOS) Forward Rate of Return (Yacktman) % Explanation
Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow of the past five years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over five years. The reason we use five years is to make it comparable to the growth rate.
Be Aware
In the Forward Rate of Return calculation, the growth rate is added directly to today's free cash flow yield. Therefore the calculation is reliable only if the company can grow at the same rate in the future as it did in the past. Investors should pay close attention to this when researching growth stocks. A more accurate measurement for return is Return on Capital.
A.O. Smith Forward Rate of Return (Yacktman) % Related Terms
Thank you for viewing the detailed overview of A.O. Smith's Forward Rate of Return (Yacktman) % provided by GuruFocus.com. Please click on the following links to see related term pages.
A.O. Smith Corporation manufactures and markets comprehensive lines of residential and commercial gas, gas tankless, and electric water heaters. Supplementary products include water heating equipment, condensing and noncondensing boilers, and water system tanks. The company's two operating segments are by geographic region: North America (majority of total revenue) and the Rest of the World. A material portion of sales in North America derive from replacing existing products, and the company utilizes a wholesale distribution channel and multiple selling locations. The Rest of the World segment sells majorly in Asian countries and operates sales offices to expand distribution and market its product portfolio.
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