Legg Mason (Legg Mason) ROC % : 3.23% (As of Jun. 2020)

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What is Legg Mason ROC %?

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. Legg Mason's annualized return on capital (ROC %) for the quarter that ended in Jun. 2020 was 3.23%.

As of today (2024-04-26), Legg Mason's WACC % is 5.76%. Legg Mason's ROC % is 5.43% (calculated using TTM income statement data). Legg Mason earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Legg Mason ROC % Historical Data

The historical data trend for Legg Mason'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.

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Legg Mason ROC % Chart

Legg Mason Annual Data

Trend

Mar11

Mar12

Mar13

Mar14

Mar15

Mar16

Mar17

Mar18

Mar19

Mar20

ROC %

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8.80

5.01

10.61

1.90

5.57

Legg Mason Quarterly Data
	Sep15	Dec15	Mar16	Jun16	Sep16	Dec16	Mar17	Jun17	Sep17	Dec17	Mar18	Jun18	Sep18	Dec18	Mar19	Jun19	Sep19	Dec19	Mar20	Jun20
ROC %	Get a 7-Day Free Trial															3.79	5.39	5.61	7.33	3.23

Legg Mason ROC % Calculation

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

	ROC % (A: Mar. 2020 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Mar. 2019 )	+	Invested Capital (A: Mar. 2020 ))	/ count )
=	504.245 * ( 1 - 25.83% )	/	( (6701.089	+	6735.572)	/ 2 )
=	373.9985165	/	6718.3305
=	5.57 %

where

	Invested Capital		(A: Mar. 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	))
=	7794.122	-	182.921	-	( 1427.827	-	max(0, 1109.744	-	2019.856	+	1427.827	))
=	6701.089

	Invested Capital		(A: Mar. 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	))
=	8006.12	-	156.981	-	( 1474.838	-	max(0, 926.057	-	2039.624	+	1474.838	))
=	6735.572

Legg Mason's annualized Return on Capital (ROC %) for the quarter that ended in Jun. 2020 is calculated as:

	ROC % (Q: Jun. 2020 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Mar. 2020 )	+	Invested Capital (Q: Jun. 2020 ))	/ count )
=	270.832 * ( 1 - 20.19% )	/	( (6735.572	+	6654.892)	/ 2 )
=	216.1510192	/	6695.232
=	3.23 %

where

	Invested Capital		(Q: Mar. 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	))
=	8006.12	-	156.981	-	( 1474.838	-	max(0, 926.057	-	2039.624	+	1474.838	))
=	6735.572

	Invested Capital		(Q: Jun. 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	))
=	7917.437	-	165.863	-	( 1378.726	-	max(0, 865.51	-	1962.192	+	1378.726	))
=	6654.892

Note: The Operating Income data used here is four times the quarterly (Jun. 2020) data.

Legg Mason (NYSE:LM) 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, Legg Mason's WACC % is 5.76%. Legg Mason's ROC % is 5.43% (calculated using TTM income statement data). Legg Mason 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.

Legg Mason ROC % Related Terms

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Legg Mason (Legg Mason) Business Description

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Address

100 International Drive, Baltimore, MD, USA, 21202-1099

Website

https://www.leggmason.com

Legg Mason provides investment management services for institutional and individual investors. The firm had $783.4 billion in managed assets at the end of June, spread among its equity (25% of total AUM), fixed-income (57%), alternatives (9%), and money market (9%) investment platforms. Legg Mason uses a multiaffiliate business model, with its single- largest affiliate, Western Asset Management, accounting for more than 60% of managed assets. Other major affiliates include ClearBridge Investments (more than 15% of AUM), Brandywine (less than 10%), and Clarion Partners (less than 10%). The remaining affiliates--Martin Currie, Royce & Associates, EnTrustPermal, QS Investors, and RARE Infrastructure--each account for 2% or less of Legg Mason's managed assets.