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# Graco ROC %

: 27.92% (As of Sep. 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 %. Graco's annualized return on capital (ROC %) for the quarter that ended in Sep. 2021 was 27.92%.

As of today (2022-01-20), Graco's WACC % is 5.43%. Graco's ROC % is 30.37% (calculated using TTM income statement data). Graco 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.

## Graco ROC % Historical Data

The historical data trend for Graco's ROC % 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.

Graco Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
ROC %
11.68 25.42 32.10 29.60 27.93

 Graco Quarterly Data Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 ROC % 34.20 33.35 30.24 30.18 27.92

## Graco ROC % Calculation

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

 ROC % (A: Dec. 2020 ) = NOPAT / Average Invested Capital = Operating Income * ( 1 - Tax Rate % ) / ( (Invested Capital (A: Dec. 2019 ) + Invested Capital (A: Dec. 2020 )) / count ) = 426.947 * ( 1 - 11.8% ) / ( (1285.411 + 1410.892) / 2 ) = 376.567254 / 1348.1515 = 27.93 %

where

 Invested Capital (A: Dec. 2019 ) = Total Assets - Accounts Payable & Accrued Expense - Excess Cash = Total Assets - Accounts Payable & Accrued Expense - ( Cash, Cash Equivalents, Marketable Securities - max(0, Total Current Liabilities - Total Current Assets + Cash, Cash Equivalents, Marketable Securities )) = 1692.21 - 185.826 - ( 220.973 - max(0, 285.322 - 791.468 + 220.973 )) = 1285.411

 Invested Capital (A: Dec. 2020 ) = Total Assets - Accounts Payable & Accrued Expense - Excess Cash = Total Assets - Accounts Payable & Accrued Expense - ( Cash, Cash Equivalents, Marketable Securities - max(0, Total Current Liabilities - Total Current Assets + Cash, Cash Equivalents, Marketable Securities )) = 1988.128 - 198.327 - ( 378.909 - max(0, 321.389 - 1023.801 + 378.909 )) = 1410.892

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

 ROC % (Q: Sep. 2021 ) = NOPAT / Average Invested Capital = Operating Income * ( 1 - Tax Rate % ) / ( (Invested Capital (Q: Jun. 2021 ) + Invested Capital (Q: Sep. 2021 )) / count ) = 498.396 * ( 1 - 14.72% ) / ( (1523.32 + 1521.507) / 2 ) = 425.0321088 / 1522.4135 = 27.92 %

where

 Invested Capital (Q: Jun. 2021 ) = Total Assets - Accounts Payable & Accrued Expense - Excess Cash = Total Assets - Accounts Payable & Accrued Expense - ( Cash, Cash Equivalents, Marketable Securities - max(0, Total Current Liabilities - Total Current Assets + Cash, Cash Equivalents, Marketable Securities )) = 2229.205 - 223.098 - ( 482.787 - max(0, 358.724 - 1203.952 + 482.787 )) = 1523.32

 Invested Capital (Q: Sep. 2021 ) = Total Assets - Accounts Payable & Accrued Expense - Excess Cash = Total Assets - Accounts Payable & Accrued Expense - ( Cash, Cash Equivalents, Marketable Securities - max(0, Total Current Liabilities - Total Current Assets + Cash, Cash Equivalents, Marketable Securities )) = 2377.328 - 251.993 - ( 603.828 - max(0, 427.214 - 1333.071 + 603.828 )) = 1521.507

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

Graco  (NYSE:GGG) 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, Graco's WACC % is 5.43%. Graco's ROC % is 30.37% (calculated using TTM income statement data). Graco 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.

## Graco ROC % Related Terms

Thank you for viewing the detailed overview of Graco's ROC % provided by GuruFocus.com. Please click on the following links to see related term pages.

Industry
Industrials NAICS : 333249 SIC : 3561
88-11th Avenue Northeast, Minneapolis, MN, USA, 55413
Website
Graco manufactures equipment used for managing fluids, coatings, and adhesives, specializing in difficult-to-handle materials. Graco's business is organized into three segments: industrial, process, and contractor. The Minnesota-based firm serves a wide range of end markets, including industrial, automotive, and construction, and its broad array of products include pumps, valves, meters, sprayers, and equipment used to apply coatings, sealants, and adhesives. The firm generated roughly \$1.7 billion in sales and \$410 million in operating income in 2020.
Executives
 Zumbolo Brian J officer: President, Asia Pacific PO BOX 1441 MINNEAPOLIS MN 55440-1441 Gallivan Karen Park officer: Executive Vice President P O BOX 1441 MINNEAPOLIS MN 55440-1441 Wheeler Kevin J. director A. O. SMITH CORPORATION 500 TENNESSEE WALTZ PARKWAY ASHLAND CITY TN 37015 Van Sant R William director PO BOX 1441 MINNEAPOLIS MN 55440-1441 Eugster Jack W director PO BOX 1441 MINNEAPOLIS MN 55440-1441 Etchart Eric director ROOM F, 22F CROSS REGION PLAZA 899 LINGLING ROAD SHANGHAI F4 200030 White Emily director C/O LULULEMON ATHLETICA INC. 1818 CORNWALL AVENUE VANCOUVER A1 V6J 1C7 Morfitt Martha A M director P.O. BOX 1441 MINNEAPOLIS MN 55440-1441 Mitau Lee R director P O BOX 1441 MINNEAPOLIS MN 55440-1441 Feragen Jody H director 1 HORMEL PLACE AUSTIN TX 55912 Gilligan J Kevin director P O BOX 1441 MINNEAPOLIS MN 55440-1441 White Timothy R officer: President, White Knight, QED 88 11TH AVENUE NE MINNEAPOLIS MN 55413 Johnson Dale D officer: President, Worldwide CED P.O. BOX 1441 MINNEAPOLIS MN 5440-1441 Chambers Caroline M officer: President, EMEA PO BOX 1441 MINNEAPOLIS MN 55440-1441 Wordell Angela F officer: EVP, Operations, President ONG 88 11TH AVENUE NE MINNEAPOLIS MN 55413

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