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Target ROC %

: 5.14% (As of Apr. 2020)
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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 %. Target's annualized return on capital (ROC %) for the quarter that ended in Apr. 2020 was 5.14%.

As of today (2020-07-16), Target's WACC % is 5.61%. Target's ROC % is 10.19% (calculated using TTM income statement data). Target 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.


Target ROC % Historical Data

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

* Premium members only.

Target Annual Data
Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19 Jan20
ROC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 11.32 11.34 11.44 10.48 11.23

Target Quarterly Data
Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Oct17 Jan18 Apr18 Jul18 Oct18 Jan19 Apr19 Jul19 Oct19 Jan20 Apr20
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 11.31 13.46 10.18 11.94 5.14

Target ROC % Calculation

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

ROC % (A: Jan. 2020 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (A: Jan. 2019 ) + Invested Capital (A: Jan. 2020 ))/ count )
=4658 * ( 1 - 21.98% )/( (32190 + 32506)/ 2 )
=3634.1716/32348
=11.23 %

where

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

ROC % (Q: Apr. 2020 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (Q: Jan. 2020 ) + Invested Capital (Q: Apr. 2020 ))/ count )
=1872 * ( 1 - 13.68% )/( (32506 + 30359)/ 2 )
=1615.9104/31432.5
=5.14 %

where

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

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


Target  (NYSE:TGT) 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, Target's WACC % is 5.61%. Target's ROC % is 10.19% (calculated using TTM income statement data). Target 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.


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