Largo (TSX:LGO) ROC %

: -9.43% (As of Dec. 2023)

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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 %. Largo's annualized return on capital (ROC %) for the quarter that ended in Dec. 2023 was -9.43%.

As of today (2024-04-17), Largo's WACC % is 15.82%. Largo's ROC % is -5.03% (calculated using TTM income statement data). Largo earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Largo ROC % Historical Data

The historical data trend for Largo'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.

* Premium members only.

Largo Annual Data

Trend

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROC %

-3.98

7.61

12.63

-3.66

-5.13

Largo Quarterly Data
	Mar19	Jun19	Sep19	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23
ROC %																-11.37	-8.99	-1.34	-11.08	-9.43

Largo ROC % Calculation

Largo's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2023 is calculated as:

	ROC % (A: Dec. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2022 )	+	Invested Capital (A: Dec. 2023 ))	/ count )
=	-21.837 * ( 1 - 7.7% )	/	( (373.105	+	412.499)	/ 2 )
=	-20.155551	/	392.802
=	-5.13 %

where

	Invested Capital		(A: Dec. 2022 )
=	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	))
=	483.286	-	36.182	-	( 73.999	-	max(0, 52.945	-	209.405	+	73.999	))
=	373.105

	Invested Capital		(A: Dec. 2023 )
=	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	))
=	511.983	-	42.179	-	( 57.305	-	max(0, 56.958	-	183.964	+	57.305	))
=	412.499

Largo's annualized Return on Capital (ROC %) for the quarter that ended in Dec. 2023 is calculated as:

	ROC % (Q: Dec. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Sep. 2023 )	+	Invested Capital (Q: Dec. 2023 ))	/ count )
=	-47.98 * ( 1 - 18.8% )	/	( (413.806	+	412.499)	/ 2 )
=	-38.95976	/	413.1525
=	-9.43 %

where

	Invested Capital		(Q: Sep. 2023 )
=	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	))
=	503.686	-	36.335	-	( 53.545	-	max(0, 62.402	-	185.582	+	53.545	))
=	413.806

	Invested Capital		(Q: Dec. 2023 )
=	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	))
=	511.983	-	42.179	-	( 57.305	-	max(0, 56.958	-	183.964	+	57.305	))
=	412.499

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

Largo (TSX:LGO) 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, Largo's WACC % is 15.82%. Largo's ROC % is -5.03% (calculated using TTM income statement data). Largo 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.

Largo ROC % Related Terms

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Largo (TSX:LGO) Business Description

Industry

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Traded in Other Exchanges

LGO:USA LR8B:Germany

Address

55 University Avenue, Suite 1105, Toronto, ON, CAN, M5J 2H7

Website

https://www.largoinc.com

Largo Inc is committed to the production and supply of high-quality vanadium products. The Company is also focused on the advancement of renewable energy storage solutions through Largo Clean Energy and its vanadium redox flow battery technology. The Company is engaged in the mining, exploration, and development of mineral properties, primarily in Brazil, through which it produces and supplies vanadium products VPURE Flake, VPURE+ Flake, and VPURE+ Powder.