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Target Corp  (NYSE:TGT) ROC %: 16.24% (As of Apr. 2019)

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 %. Target Corp's annualized return on capital (ROC) for the quarter that ended in Apr. 2019 was 16.24%.

As of today, Target Corp's WACC % is 7.23%. Target Corp's return on capital is 15.53% (calculated using TTM income statement data). Target Corp 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.

* Premium members only.

Target Corp Annual Data

Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ROC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 11.55 14.34 15.28 16.27 15.82

Target Corp Quarterly Data

Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Oct17 Jan18 Apr18 Jul18 Oct18 Jan19 Apr19
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 15.38 16.62 13.15 16.39 16.24

Calculation

Target Corp's annualized Return on Capital (ROC) for the fiscal year that ended in Jan. 2019 is calculated as:

Return on Capital (ROC)(A: Jan. 2019 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (A: Jan. 2018 ) + Invested Capital (A: Jan. 2019 ))/2)
=4110 * ( 1 - 20.29% )/( (20406 + 21016)/2)
=3276.081/20711
=15.82 %

Invested Capital(A: Jan. 2018 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Stockholders Equity - Cash
=11117 + 281 + 0 + 11651 - 2643
=20406

Invested Capital(A: Jan. 2019 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Stockholders Equity - Cash
=10223 + 1052 + 0 + 11297 - 1556
=21016

Target Corp's annualized Return on Capital (ROC) for the quarter that ended in Apr. 2019 is calculated as:

Return on Capital (ROC)(Q: Apr. 2019 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Jan. 2019 ) + Invested Capital (Q: Apr. 2019 ))/2)
=4540 * ( 1 - 22.43% )/( (21016 + 22357)/2)
=3521.678/21686.5
=16.24 %

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 Stockholders Equity - Cash
=10223 + 1052 + 0 + 11297 - 1556
=21016

Invested Capital(Q: Apr. 2019 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Stockholders Equity - Cash
=11357 + 1056 + 0 + 11117 - 1173
=22357

Note: The Operating Income data used here is four times the quarterly (Apr. 2019) 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 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 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, Target Corp's WACC % is 7.23%. Target Corp's return on capital is {stock_data.stock.roic}}% (calculated using TTM income statement data). Target Corp 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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$TGT - This Is Why You Should Add Target Add Target

- Seekingalpha 2019-05-26 20:26:12

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