Lancashire Holdings (LSE:LRE) ROIC %

Lancashire Holdings Annual Data
	Trend	Dec14	Dec15	Dec16	Dec17	Dec18	Dec19	Dec20	Dec21	Dec22	Dec23
ROIC %							5.29	0.62	-1.14	0.31	11.20

Lancashire Holdings Semi-Annual Data
	Jun14	Dec14	Jun15	Dec15	Jun16	Dec16	Jun17	Dec17	Jun18	Dec18	Jun19	Dec19	Jun20	Dec20	Jun21	Dec21	Jun22	Dec22	Jun23	Dec23
ROIC %																-8.00	2.87	-2.16	11.41	11.32

For the Insurance - Specialty subindustry, Lancashire 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.

For the Insurance industry and Financial Services sector, Lancashire Holdings's ROIC % distribution charts can be found below:

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

Lancashire Holdings ROIC % Calculation

Lancashire Holdings's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:

where

Lancashire Holdings's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Dec. 2023 is calculated as:

where

Note: The EBIT data used here is two times the semi-annual (Dec. 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.

Lancashire Holdings  (LSE:LRE) 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, Lancashire Holdings's WACC % is 8.50%. Lancashire Holdings's ROIC % is 11.35% (calculated using TTM income statement data). Lancashire 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. Lancashire 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.

Lancashire Holdings ROIC % Related Terms

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Lancashire Holdings (LSE:LRE) Business Description