Avalon Advanced Materials (TSX:AVL) ROC % : -5.69% (As of Nov. 2023)

Avalon Advanced Materials ROC % Chart

Avalon Advanced Materials Annual Data
	Trend	Aug12	Aug13	Aug14	Aug15	Aug16	Aug17	Aug18	Aug19	Aug20	Aug21
ROC %		Get a 7-Day Free Trial					-2.39	-2.22	-1.94	-1.74	-1.97

Avalon Advanced Materials Quarterly Data
	Aug18	Nov18	Feb19	May19	Aug19	Nov19	Feb20	May20	Aug20	Nov20	Feb21	May21	Aug21	Nov21	Feb22	May22	Nov22	Feb23	May23	Nov23
ROC %	Get a 7-Day Free Trial															-2.59	-2.08	-2.43	-2.55	-5.69

Avalon Advanced Materials ROC % Calculation

Avalon Advanced Materials's annualized Return on Capital (ROC %) for the fiscal year that ended in Aug. 2021 is calculated as:

where

Avalon Advanced Materials's annualized Return on Capital (ROC %) for the quarter that ended in Nov. 2023 is calculated as:

where

Note: The Operating Income data used here is four times the quarterly (Nov. 2023) 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.

Avalon Advanced Materials  (TSX:AVL) 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, Avalon Advanced Materials's WACC % is 5.61%. Avalon Advanced Materials's ROC % is -3.98% (calculated using TTM income statement data). Avalon Advanced Materials 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.

Avalon Advanced Materials ROC % Related Terms

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Avalon Advanced Materials (TSX:AVL) Business Description