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Tencent Holdings ROIC %

: 6.63% (As of Mar. 2022)
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ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Tencent Holdings's annualized return on invested capital (ROIC %) for the quarter that ended in Mar. 2022 was 6.63%.

As of today (2022-08-14), Tencent Holdings's WACC % is 8.01%. Tencent Holdings's ROIC % is 8.09% (calculated using TTM income statement data). Tencent Holdings 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.


Tencent Holdings ROIC % Historical Data

The historical data trend for Tencent Holdings's ROIC % 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.

Tencent Holdings Annual Data
Trend Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20 Dec21
ROIC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 15.40 12.09 11.62 11.71 9.49

Tencent Holdings Quarterly Data
Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22
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 11.10 9.40 8.10 7.10 6.63

Competitive Comparison

For the Internet Content & Information subindustry, Tencent Holdings's ROIC %, along with its competitors' market caps and ROIC % data, can be viewed below:

* 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. Note that "N/A" values will not show up in the chart.

   

Tencent Holdings ROIC % Distribution

For the Interactive Media industry and Communication Services sector, Tencent Holdings's ROIC % distribution charts can be found below:

* The bar in red indicates where Tencent Holdings's ROIC % falls into.



Tencent Holdings ROIC % Calculation

Tencent Holdings's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2021 is calculated as:

ROIC % (A: Dec. 2021 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (A: Dec. 2020 ) + Invested Capital (A: Dec. 2021 ))/ count )
=152312.72023613 * ( 1 - 8.16% )/( (1374248.4106862 + 1573008.3294868)/ 2 )
=139884.00226486/1473628.3700865
=9.49 %

where

Invested Capital(A: Dec. 2020 )
=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))
=1580685.5867601 - 148863.0811096 - ( 270134.03089016 - max(0, 318975.04321563 - 376549.13817993+270134.03089016))
=1374248.4106862

Invested Capital(A: Dec. 2021 )
=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))
=1974287.1015653 - 301222.64565965 - ( 321241.46264111 - max(0, 493580.3466629 - 593636.47308181+321241.46264111))
=1573008.3294868

Tencent Holdings's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Mar. 2022 is calculated as:

ROIC % (Q: Mar. 2022 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (Q: Dec. 2021 ) + Invested Capital (Q: Mar. 2022 ))/ count )
=124615.38164739 * ( 1 - 18.17% )/( (1573008.3294868 + 1502551.9246603)/ 2 )
=101972.76680206/1537780.1270735
=6.63 %

where

Invested Capital(Q: Dec. 2021 )
=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))
=1974287.1015653 - 301222.64565965 - ( 321241.46264111 - max(0, 493580.3466629 - 593636.47308181+321241.46264111))
=1573008.3294868

Invested Capital(Q: Mar. 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))
=1842275.195032 - 218698.34259055 - ( 351080.30009772 - max(0, 388047.67228825 - 509072.60006935+351080.30009772))
=1502551.9246603

Note: The Operating Income data used here is four times the quarterly (Mar. 2022) 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.


Tencent Holdings  (HKSE:00700) ROIC % Explanation

ROIC % 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 ROIC % 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, Tencent Holdings's WACC % is 8.01%. Tencent Holdings's ROIC % is 8.09% (calculated using TTM income statement data). Tencent Holdings 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. Tencent Holdings 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 %, ROIC % 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.


Tencent Holdings ROIC % Related Terms

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Tencent Holdings Business Description

Tencent Holdings logo
Address
No. 33 Haitian 2nd Road, Tencent Binhai Towers, Nanshan District, Shenzhen, CHN, 518054
Tencent is arguably the most influential internet firm in China as one can hardly go by a day without using its products. Tencent is the world's largest video game vendor and owns the world's top-grossing mobile game--Honor of Kings. Tencent also runs China's largest social media super app--WeChat. The app is now part of the fabric of life for Chinese people who use it to chat, shop, watch videos, play games, order food and taxis, and more. Equally as impressive as its own portfolio, Tencent is also among the world's largest venture capital and investment corporations. The firm is now one of the largest shareholders in leading tech companies like Meituan, JD, DiDi, Snap, PDD, Kuaishou, Epic Games, and more.

Tencent Holdings Headlines

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