Sun Life Financial (TSX:SLF) ROC %

: 1.29% (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 %. Sun Life Financial's annualized return on capital (ROC %) for the quarter that ended in Dec. 2023 was 1.29%.

As of today (2024-04-19), Sun Life Financial's WACC % is 7.88%. Sun Life Financial's ROC % is 1.26% (calculated using TTM income statement data). Sun Life Financial earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Sun Life Financial ROC % Historical Data

The historical data trend for Sun Life Financial'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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Sun Life Financial Annual Data

Trend

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROC %

1.19

1.04

1.45

1.08

1.27

Sun Life Financial Quarterly Data
	Mar19	Jun19	Sep19	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23
ROC %																1.72	1.31	1.08	1.38	1.29

Sun Life Financial ROC % Calculation

Sun Life Financial'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
=	EBIT * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2022 )	+	Invested Capital (A: Dec. 2023 ))	/ count )
=	4482 * ( 1 - 11.73% )	/	( (307667.2	+	316777.8)	/ 2 )
=	3956.2614	/	312222.5
=	1.27 %

where

	Invested Capital		(A: Dec. 2022 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Balance Sheet Cash And Cash Equivalents	-	5% * Revenue )
=	323608	-	6356	-	( 9378	-	5% * -4136 )
=	307667.2

	Invested Capital		(A: Dec. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Balance Sheet Cash And Cash Equivalents	-	5% * Revenue )
=	333241	-	6926	-	( 11170	-	5% * 32656 )
=	316777.8

Sun Life Financial'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
=	EBIT * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Sep. 2023 )	+	Invested Capital (Q: Dec. 2023 ))	/ count )
=	3608 * ( 1 - -11.05% )	/	( (304917.6	+	316076.05)	/ 2 )
=	4006.684	/	310496.825
=	1.29 %

where

	Invested Capital		(Q: Sep. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Balance Sheet Cash And Cash Equivalents	-	5% * Revenue )
=	313846	-	0	-	( 8936	-	5% * 152 )
=	304917.6

	Invested Capital		(Q: Dec. 2023 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Balance Sheet Cash And Cash Equivalents	-	5% * Revenue )
=	333241	-	6926	-	( 11170	-	5% * 18621 )
=	316076.05

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

Sun Life Financial (TSX:SLF) 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, Sun Life Financial's WACC % is 7.88%. Sun Life Financial's ROC % is 1.26% (calculated using TTM income statement data). Sun Life Financial 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.

Sun Life Financial ROC % Related Terms

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Sun Life Financial (TSX:SLF) Business Description

Industry

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Address

1 York Street, 31st Floor, Toronto, ON, CAN, M5J 0B6

Website

https://www.sunlife.com

Sun Life provides life insurance, retirement, and asset management products to individuals and corporate customers in Canada, the United States, and Asia. The company's investment management business contributes approximately 38% of its adjusted earnings and has around CAD 1 trillion in assets under management as of the second quarter of 2023. The Canada business contributes about 32% of adjusted earnings and provides individual life and health insurance, group insurance, retirement services, and wealth management solutions. The U.S. business contributes approximately 14% of earnings and is mainly focused on providing group insurance products and managing the in-force life insurance policies. Finally, the Asia segment contributes around 16% of earnings.