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Salesforce.com Inc  (NYSE:CRM) ROIC %: 5.52% (As of Jan. 2019)

Return on invested capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Salesforce.com Inc's annualized return on invested capital (ROIC) for the quarter that ended in Jan. 2019 was 5.52%.

As of today, Salesforce.com Inc's WACC % is 8.54%. Salesforce.com Inc's return on invested capital is 5.03% (calculated using TTM income statement data). Salesforce.com Inc earns returns that do not match up to its cost of capital. It will destroy value as it grows.


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.

Salesforce.com Inc Annual Data

Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17 Jan18 Jan19
ROIC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -3.62 -1.78 6.34 4.97 5.49

Salesforce.com Inc Quarterly Data

Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Oct17 Jan18 Apr18 Jul18 Oct18 Jan19
ROIC % 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 10.23 8.83 5.32 2.00 5.52

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Salesforce.com Inc Distribution

* The bar in red indicates where Salesforce.com Inc's ROIC % falls into.



Calculation

Salesforce.com Inc's annualized Return on Invested Capital (ROIC) for the fiscal year that ended in Jan. 2019 is calculated as:

Return on Invested Capital(A: Jan. 2019 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (A: Jan. 2018 ) + Invested Capital (A: Jan. 2019 ))/2)
=535 * ( 1 - -12.92% )/( (7575 + 14439)/2)
=604.122/11007
=5.49 %

where

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
=695 + 1025 + 0 + 10376 - 4521
=7575

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
=3173 + 3 + 0 + 15605 - 4342
=14439

Salesforce.com Inc's annualized Return on Invested Capital (ROIC) for the quarter that ended in Jan. 2019 is calculated as:

Return on Invested Capital(Q: Jan. 2019 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Oct. 2018 ) + Invested Capital (Q: Jan. 2019 ))/2)
=548 * ( 1 - -51.46% )/( (15634 + 14439)/2)
=830.0008/15036.5
=5.52 %

where

Invested Capital(Q: Oct. 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
=3685 + 706 + 0 + 14693 - 3450
=15634

Invested Capital(Q: {Q1})
=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
=3173 + 3 + 0 + 15605 - 4342
=14439

Note: The Operating Income data used here is four times the quarterly (Jan. 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 Invested Capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. 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, Salesforce.com Inc's WACC % is 8.54%. Salesforce.com Inc's return on invested capital is 5.03% (calculated using TTM income statement data).


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.


Related Terms

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