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Darden Restaurants ROC %

: 5.92% (As of Feb. 2021)
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ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Darden Restaurants's annualized return on capital (ROC %) for the quarter that ended in Feb. 2021 was 5.92%.

As of today (2021-05-18), Darden Restaurants's WACC % is 9.85%. Darden Restaurants's ROC % is 0.80% (calculated using TTM income statement data). Darden Restaurants earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Darden Restaurants ROC % Historical 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.

* Premium members only.

Darden Restaurants Annual Data
May11 May12 May13 May14 May15 May16 May17 May18 May19 May20
ROC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 9.93 10.21 13.74 13.57 1.68

Darden Restaurants Quarterly Data
May16 Aug16 Nov16 Feb17 May17 Aug17 Nov17 Feb18 May18 Aug18 Nov18 Feb19 May19 Aug19 Nov19 Feb20 May20 Aug20 Nov20 Feb21
ROC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 9.51 -6.19 2.59 4.45 5.92

Darden Restaurants ROC % Calculation

Darden Restaurants's annualized Return on Capital (ROC %) for the fiscal year that ended in May. 2020 is calculated as:

ROC % (A: May. 2020 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (A: May. 2019 ) + Invested Capital (A: May. 2020 ))/ count )
=438.1 * ( 1 - 69.44% )/( (5822.1 + 10128.4)/ 2 )
=133.88336/7975.25
=1.68 %

where

Darden Restaurants's annualized Return on Capital (ROC %) for the quarter that ended in Feb. 2021 is calculated as:

ROC % (Q: Feb. 2021 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (Q: Nov. 2020 ) + Invested Capital (Q: Feb. 2021 ))/ count )
=604.4 * ( 1 - 2.34% )/( (9944.7 + 9987.7)/ 2 )
=590.25704/9966.2
=5.92 %

where

Note: The Operating Income data used here is four times the quarterly (Feb. 2021) 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.


Darden Restaurants  (NYSE:DRI) ROC % Explanation

ROC % 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 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 ROC % 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, Darden Restaurants's WACC % is 9.85%. Darden Restaurants's ROC % is 0.80% (calculated using TTM income statement data). Darden Restaurants earns returns that do not match up to its cost of capital. It will destroy value as it grows.


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.


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