Switch to:
JPMorgan Chase & Co  (NYSE:JPM) ROC %: 20.11% (As of Jun. 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 %. JPMorgan Chase & Co's annualized return on capital (ROC) for the quarter that ended in Jun. 2017 was 20.11%.

As of today, JPMorgan Chase & Co's WACC % is 6.18%. JPMorgan Chase & Co's return on capital is 16.84% (calculated using TTM income statement data). JPMorgan Chase & Co 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.

JPMorgan Chase & Co Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 ROC % 5.84 6.29 14.43 16.04 12.17

JPMorgan Chase & Co Quarterly Data

 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 ROC % 12.48 14.27 16.20 20.11 18.04

Calculation

JPMorgan Chase & Co'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) = 34536 * ( 1 - 28.38% ) / ( (212386 + 194243) /2) = 24734.6832 / 203314.5 = 12.17 %

 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 = 309756 + 15562 + 0 + 247573 - 360505 = 212386

 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 = 317950 + 11738 + 0 + 254190 - 389635 = 194243

JPMorgan Chase & Co's annualized Return on Capital (ROC) for the quarter that ended in Jun. 2017 is calculated as:

 Return on Capital (ROC) (Q: Jun. 2017 ) = NOPAT / Average Invested Capital = Operating Income*(1-Tax Rate) / ( (Invested Capital (Q: Mar. 2017 ) + Invested Capital (Q: Jun. 2017 )) /2) = 38996 * ( 1 - 27.9% ) / ( (124210 + 155438) /2) = 28116.116 / 139824 = 20.11 %

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 = 313834 + 14908 + 0 + 255863 - 460395 = 124210

 Invested Capital (Q: Jun. 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 = 323909 + 22207 + 0 + 258483 - 449161 = 155438

Note: The Operating Income data used here is four times the quarterly (Jun. 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, JPMorgan Chase & Co's WACC % is 6.18%. JPMorgan Chase & Co's return on capital is {stock_data.stock.roic}}% (calculated using TTM income statement data). JPMorgan Chase & Co 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 the Internet

###### Here Are Key Takeaways From Wall Street's Third-Quarter Earnings

- Bloomberg 2017-10-17 14:09:49

###### Fundstrat's Top Timely Stock Ideas Ahead of a Possible Short-Term Pullback

- theStreet 2017-10-17 13:11:00

###### Dow Tops 23,000 as UnitedHealth, J&J Earnings Push Healthcare Gains

- theStreet 2017-10-17 11:12:00

###### Goldman's (GS) Q3 Earnings Encouraging, Revenues Up Y/Y

- Zacks 2017-10-17 09:57:00

###### Stocks Mixed as Dow Nears 23,000 After Morgan Stanley, Goldman Earnings

- theStreet 2017-10-17 09:36:00

###### Stock Market News For Oct 17, 2017

- Zacks 2017-10-17 08:57:00

###### Morgan Stanley earnings beat Street as strong wealth management trumps weak trading; shares rise

- cnbc 2017-10-17 08:42:40

###### Goldman Sachs Posts Worst-In-Class Trading Performance, Again

- theStreet 2017-10-17 07:58:00

###### Citigroup Eyes Credit Quality Issues

- Seekingalpha 2017-10-17 07:54:10

- Seekingalpha 2017-10-17 07:52:14

###### Stock Futures Mixed With Flood of Earnings From Morgan Stanley, Goldman Sachs

- theStreet 2017-10-17 07:50:00

###### Comerica's (CMA) Q3 Earnings and Revenues Beat Estimates

- Zacks 2017-10-17 07:49:00

###### Morgan Stanley (MS) Tops Q3 Earnings, Wealth Management Aids

- Zacks 2017-10-17 07:39:00

###### 30 years later, Wall Street still dangles over 'Black Monday' abyss

- theStreet 2017-10-17 07:30:00

###### Morgan Stanley's wealth unit cushions blow from bond-trading's slide

- theStreet 2017-10-17 07:23:00

###### Citigroup Slow Steady Still Win Race

- Seekingalpha 2017-10-17 07:15:47

- theStreet 2017-10-16 19:18:00

###### With market fully valued, this earnings season is crucial: Strategist

- cnbc 2017-10-16 17:33:36

###### Activist Fund Wants Credit Suisse Broken Into Three Parts

- theStreet 2017-10-16 17:24:00

###### Goldman Sachs vs. Morgan Stanley: Which Earnings Report Will Be Best?

- Zacks 2017-10-16 17:11:00

###### Jamie Dimon is betting big on the technology behind 'fraud' bitcoin

- cnbc 2017-10-16 16:29:53

###### #Bitcoin: Jamie Dimon Breaks Vow of Silence

- Barron's 2017-10-16 15:28:11

###### Schv Value Still Makes Sense

- Seekingalpha 2017-10-16 15:09:53

###### Dividend Growth Portfolio Update

- Seekingalpha 2017-10-16 12:17:59

###### Bitcoin: Jamie Dimon Breaks Vow of Silence

- Barron's 2017-10-16 11:01:00

###### These stocks have popped more than 75% since Trump was elected

- MarketWatch 2017-10-16 10:58:00

###### Big banks shine in a pricey market

- Barron's 2017-10-16 10:53:49

###### Credit card data shows delinquencies rose in September

- cnbc 2017-10-16 10:45:46

###### Apple's stock accounts for over half of the Dow's gain

- MarketWatch 2017-10-16 10:36:00

###### Citigroup Stock Could Tumble Another 11%, Analyst Says

- theStreet 2017-10-16 10:12:00

###### Here's Why PayPal Is Now Worth More Than American Express

- theStreet 2017-10-16 10:07:00

###### Stock market sets a round of fresh records as investors focus on earnings

- MarketWatch 2017-10-16 09:41:00

###### CSX and CP Q3 Earnings: Here are the Key Predictions

- Zacks 2017-10-16 09:37:00

###### Jpmorgan Shows Gold Standard Banking

- Seekingalpha 2017-10-16 07:17:09

###### Banks May Lead Markets Higher; Reseach Upgrades -- Jim Cramer's Top Thoughts

- theStreet 2017-10-16 01:00:00

###### Shorter in 2 Banks; Volatility Near Rock-Bottom: Doug Kass' Views

- theStreet 2017-10-16 01:00:00

###### American Bulls Clash With Europe’s Bears at World Finance Summit

- Bloomberg 2017-10-16 00:00:07

###### Jpmorgan Chase Closing 100 Mark

- Seekingalpha 2017-10-15 21:45:06

###### Goldman Sachs and JPMorgan Say They’re Assuming a ‘Hard Brexit’

- Bloomberg 2017-10-15 19:04:16

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)