Switch to:
Amazon.com Inc  (NAS:AMZN) ROC %: 6.57% (As of Sep. 2017)

Return on capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Amazon.com Inc's annualized return on capital (ROC) for the quarter that ended in Sep. 2017 was 6.57%.

As of today, Amazon.com Inc's WACC % is 10.38%. Amazon.com Inc's return on capital is 17.48% (calculated using TTM income statement data). Amazon.com Inc generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Amazon.com Inc Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 ROC % 169.56 33.26 10.75 12.97 32.62

Amazon.com Inc Quarterly Data

 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 ROC % 15.49 40.13 37.36 8.69 6.57

Calculation

Amazon.com Inc's annualized Return on Capital (ROC) for the fiscal year that ended in Dec. 2016 is calculated as:

 Return on Capital (ROC) (A: Dec. 2016 ) = NOPAT / Average Invested Capital = Operating Income*(1-Tax Rate) / ( (Invested Capital (A: Dec. 2015 ) + Invested Capital (A: Dec. 2016 )) /2) = 4186 * ( 1 - 36.61% ) / ( (7751 + 8517) /2) = 2653.5054 / 8134 = 32.62 %

 Invested Capital (A: Dec. 2015 ) = Book Value of Debt + Book Value of Equity - Cash = Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash = 14175 + 0 + 0 + 13384 - 19808 = 7751

 Invested Capital (A: Dec. 2016 ) = Book Value of Debt + Book Value of Equity - Cash = Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash = 15213 + 0 + 0 + 19285 - 25981 = 8517

Amazon.com Inc's annualized Return on Capital (ROC) for the quarter that ended in Sep. 2017 is calculated as:

 Return on Capital (ROC) (Q: Sep. 2017 ) = NOPAT / Average Invested Capital = Operating Income*(1-Tax Rate) / ( (Invested Capital (Q: Jun. 2017 ) + Invested Capital (Q: Sep. 2017 )) /2) = 1388 * ( 1 - 18.35% ) / ( (9446 + 25058) /2) = 1133.302 / 17252 = 6.57 %

where

 Invested Capital (Q: {Q2}) = Book Value of Debt + Book Value of Equity - Cash = Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash = 7683 + 0 + 0 + 23214 - 21451 = 9446

 Invested Capital (Q: Sep. 2017 ) = Book Value of Debt + Book Value of Equity - Cash = Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash = 24710 + 0 + 0 + 24658 - 24310 = 25058

Note: The Operating Income data used here is four times the quarterly (Sep. 2017) operating income data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Explanation

Return on Capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. 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 rather than net income in the numerator. The second is the tax adjustment to this operating income, 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 is the current year's number.

Why is Return on Capital 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, Amazon.com Inc's WACC % is 10.38%. Amazon.com Inc's return on capital is {stock_data.stock.roic}}% (calculated using TTM income statement data). Amazon.com Inc generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.

Be Aware

Like ROE and ROA, ROC 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.

Related Terms

From GuruFocus

###### 4 Stocks Move on Tuesday

By Omar Venerio about AMZN 2018-01-16 13:33:11

From the Internet

###### \$ADBE \$ALGN \$AMZN \$ATVI \$BCO \$COO \$HDB \$ICPT \$ILG \$IPGP \$ISRG \$JD \$NVDA \$PCLN \$SPY \$STZ \$WAT Bulletproof Investing Performance Week 7

- Seekingalpha 2018-01-17 03:35:46

###### \$AMZN \$ADBE \$NKE \$FB \$GOOG \$GOOGL \$CELG \$REGN \$PCLN \$ORLY \$ZTS \$TJX \$MSFT \$ALGN Polen Capital Portfolio Manager Commentary Q4 2017

- Seekingalpha 2018-01-17 03:16:34

###### Top 8 Internet Stocks to Own in 2018

- theStreet 2018-01-16 21:52:00

###### 3 Disruptive Stocks That Justify Their High Valuations

- Fool 2018-01-16 21:21:00

###### \$AMZN \$AZO \$ORLY \$WMT \$TSLA \$AAP Advance Auto Parts Stock Analysis Stacks Peers Oreilly Autozone

- Seekingalpha 2018-01-16 20:58:14

###### Cramer Goes Off the Big Tech Charts

- theStreet 2018-01-16 19:25:00

###### Amplify ETFs CEO thinks blockchain will transform investment leaders

- cnbc 2018-01-16 19:13:28

###### Wal-Mart Is Testing an AI-Powered Robot

- Fool 2018-01-16 18:41:00

###### With Social Media Use Set to Grow in 2018, Buy Twitter (TWTR)

- Zacks 2018-01-16 17:17:00

###### Why the tech rally may still have more room to run before stalling

- theStreet 2018-01-16 16:39:00

###### Initial coin offerings are the 'Wild West' of start-up land — here's how one investor spots a scam

- cnbc 2018-01-16 16:21:57

###### Stock market's wild flip flop comes as warning signs build

- cnbc 2018-01-16 15:52:32

###### 3 Large-Cap Growth ETFs for Your Portfolio

- Zacks 2018-01-16 15:52:00

###### Why Did Best Buy, Costco, and Wal-Mart Stock Make Gains in 2017?

- Fool 2018-01-16 15:20:00

- Zacks 2018-01-16 15:01:00

###### \$AAPL #APPLE \$AMZN \$BP \$DIA \$DTYS \$FB \$GOOGL \$GOVT \$IBB \$IEF \$IEI \$IJR \$IVV \$IWD \$IWF \$NFLX \$PST \$QQQ \$RDS.A \$SCHO Stocks Beware 10 Year Treasury Dancing Oil

- Seekingalpha 2018-01-16 14:13:32

###### Retail Sales Rise Again: A Sector to Bet On in '18?

- Zacks 2018-01-16 14:05:00

###### Amazon stock rockets toward 10th straight record close as analysts cheer ad opportunities

- MarketWatch 2018-01-16 13:18:00

###### A Wall Street giant makes a \$75 million bet on academic philosophy

- cnbc 2018-01-16 13:03:31

###### Einhorn Hopes For Better 2018 With Time Warner, Twitter Stakes

- theStreet 2018-01-16 13:01:00

###### \$AMZN Amazon Just Keep Buying

- Seekingalpha 2018-01-16 12:41:59

###### January breakout accelerates, S&P 500 clears 20-day volatility bands

- MarketWatch 2018-01-16 12:40:00

###### Amazon Touches New High On Upgrade & Grocery Sales

- Zacks 2018-01-16 12:26:00

###### January breakout accelerates, S&P 500 clears 20-day volatility bands

- MarketWatch 2018-01-16 12:09:00

###### Tech Today: Qualcomm Fights Back, Amazon Targets Rise, Liking Twitter

- Barron's 2018-01-16 11:40:00

###### \$ACHC \$AMZN \$ANGI \$DATA \$FB \$LPSN \$MSFT \$ORCL \$P \$RDFN \$RLGY \$SNAP \$TRUE \$ZG Danger Zone Highlights Lowlights 2017

- Seekingalpha 2018-01-16 11:39:31

###### \$AMZN \$EBAY Now Right Time Buy Ebay

- Seekingalpha 2018-01-16 10:50:06

- Fool 2018-01-16 10:43:00

###### \$AMZN Amazon Undervalued Company

- Seekingalpha 2018-01-16 10:29:57

###### Microsoft market cap briefly tops \$700 billion for the first time

- MarketWatch 2018-01-16 10:21:00

###### \$AAPL #APPLE \$AMZN \$MUSIC Significance Spotifys Direct Listing Profitability

- Seekingalpha 2018-01-16 10:08:01

###### Bets on falling volatility now ‘most crowded trade’: fund managers

- MarketWatch 2018-01-16 10:05:00

###### Amazon's stock jumps toward 10th-straight gain to another record

- MarketWatch 2018-01-16 10:00:00

###### Google is planning to expand undersea cables to speed up cloud computing

- MarketWatch 2018-01-16 09:52:00

###### Amazon stock rises after BMO raises price target to new Street high

- MarketWatch 2018-01-16 09:36:00

###### Amazon Studios signs 'Catastrophe' co-creator Sharon Horgan to exclusive overall deal

- MarketWatch 2018-01-16 09:27:00

###### Was Amazon's \$50 Million Football Bet Worth It?

- Fool 2018-01-16 08:45:00

###### \$AMZN \$ATSG \$MCD \$YUM \$AAWW \$ALK \$ALL \$BA \$CAT \$CBRL \$CHRW \$CSX \$DAL \$DE \$FDX \$GD \$KSU \$LMT \$LUV \$NSC \$PGR \$RUTH Dividend Flow Turned Flood Part Ii

- Seekingalpha 2018-01-16 08:07:44

###### Apple’s stock just broke out from a 2-month hibernation

- MarketWatch 2018-01-16 07:25:00

###### Inside Ford's New 475hp Mustang Bullitt, Ranger Pickup and Edge ST SUV

- theStreet 2018-01-15 19:52:00

###### Why 2018 Will Be the Year of the Smart Speaker

- Fool 2018-01-15 16:33:00

###### AMD vs. Intel: Who Will Win the CPU War in 2018?

- Fool 2018-01-15 16:31:00

###### \$AMZN \$HD \$WMT \$LOW Lowes Fixing Broken

- Seekingalpha 2018-01-15 16:10:13

###### Why User Growth Is Still King For Netflix

- Zacks 2018-01-15 15:38:00

###### Could Netflix Produce Disney-Sized Revenue Someday?

- Fool 2018-01-15 15:16:00

###### Intel Corp. Set to Disappoint Desktop PC Gamers in 2018

- Fool 2018-01-15 14:53:00

###### 8 top CES 2018 takeaways: what's next for IoT, VR, autonomous cars and more

- theStreet 2018-01-15 14:39:00

###### Why The NBA's Global Business Is On The Rise

- Zacks 2018-01-15 14:17:00

###### Why Facebook's Potential New Smart-Home Portal Isn't Wowing Us

- Fool 2018-01-15 13:16:00

- Zacks 2018-01-15 12:49:00

###### Amazon's Whole Foods Deal Was a 'Pearl Harbor Moment' in Retail: PayPal CEO

- theStreet 2018-01-15 12:37:00

###### \$AAPL #APPLE \$ABT \$AFL \$AMP \$AMZN \$BAC \$BDX \$BP \$C \$CAH \$CAT \$CCL \$CSCO \$CVS \$CVX \$D \$DIS \$DLR \$DUK \$EMR \$ETN \$FB Dividend Growth Portfolio Q4 2017 Summary

- Seekingalpha 2018-01-15 12:08:05

###### Where Will Mercadolibre Inc Be in 5 Years?

- Fool 2018-01-15 11:30:00

###### Why 2017 Was a Year to Remember for Wal-Mart Stores Inc.

- Fool 2018-01-15 10:15:00

###### Itâ€™s too soon to lose your #Faangs

- Barron's 2018-01-15 09:32:50

###### Amazon Partners Airtel, Offers 1-Year Free Prime Membership

- Zacks 2018-01-15 09:28:00

###### Is Kroger (KR) Eyeing Boxed to Counter Amazon's Dominance?

- Zacks 2018-01-15 09:20:00

###### Retailers Cap a Robust Holiday-Shopping Season: 5 Must Buys

- Zacks 2018-01-15 09:00:00

###### Stock Market News for Jan 15, 2018

- Zacks 2018-01-15 08:39:00

###### Amazon Won't Be Only Retailer Alive in 5 Years

- theStreet 2018-01-15 08:20:00

###### \$AMZN \$NFLX \$NNN \$O \$VNQ \$ADC \$EPR One Favorite Reits 6_9 Percent Yield 20 Percent Upside

- Seekingalpha 2018-01-15 08:00:08

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)