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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 %. Nortech Systems's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 36.34%.
As of today (2024-04-26), Nortech Systems's WACC % is 5.55%. Nortech Systems's ROIC % is 15.39% (calculated using TTM income statement data). Nortech Systems 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.
The historical data trend for Nortech Systems'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.
Nortech Systems Annual Data | |||||||||||||||||||||
Trend | Dec14 | Dec15 | Dec16 | Dec17 | Dec18 | Dec19 | Dec20 | Dec21 | Dec22 | Dec23 | |||||||||||
ROIC % | Get a 7-Day Free Trial | 0.88 | -6.37 | 6.26 | 4.82 | 14.94 |
Nortech Systems Quarterly Data | ||||||||||||||||||||
Mar19 | Jun19 | Sep19 | Dec19 | Mar20 | Jun20 | Sep20 | Dec20 | Mar21 | Jun21 | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | |
ROIC % | Get a 7-Day Free Trial | -3.46 | 6.41 | 5.98 | 11.45 | 36.34 |
For the Medical Devices subindustry, Nortech Systems'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 Medical Devices & Instruments industry and Healthcare sector, Nortech Systems's ROIC % distribution charts can be found below:
* The bar in red indicates where Nortech Systems's ROIC % falls into.
Nortech Systems's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:
ROIC % (A: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (A: Dec. 2022 ) | + | Invested Capital (A: Dec. 2023 )) | / count ) |
= | 5.953 * ( 1 - -25.76% ) | / | ( (47.175 | + | 53.042) | / 2 ) |
= | 7.4864928 | / | 50.1085 | |||
= | 14.94 % |
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 | )) |
= | 69.54 | - | 21.338 | - | ( 1.027 | - | max(0, 26.398 | - | 54.86 | + | 1.027 | )) |
= | 47.175 |
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 | )) |
= | 75.127 | - | 21.125 | - | ( 0.96 | - | max(0, 26.582 | - | 58.793 | + | 0.96 | )) |
= | 53.042 |
Nortech Systems's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Dec. 2023 is calculated as:
ROIC % (Q: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (Q: Sep. 2023 ) | + | Invested Capital (Q: Dec. 2023 )) | / count ) |
= | 10.708 * ( 1 - -70.33% ) | / | ( (47.347 | + | 53.042) | / 2 ) |
= | 18.2389364 | / | 50.1945 | |||
= | 36.34 % |
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 | )) |
= | 65.987 | - | 17.941 | - | ( 0.699 | - | max(0, 23.199 | - | 52.594 | + | 0.699 | )) |
= | 47.347 |
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 | )) |
= | 75.127 | - | 21.125 | - | ( 0.96 | - | max(0, 26.582 | - | 58.793 | + | 0.96 | )) |
= | 53.042 |
Note: The Operating Income data used here is four times the quarterly (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.
Nortech Systems (NAS:NSYS) 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, Nortech Systems's WACC % is 5.55%. Nortech Systems's ROIC % is 15.39% (calculated using TTM income statement data). Nortech Systems 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. Nortech Systems 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.
Thank you for viewing the detailed overview of Nortech Systems's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Amy S. Fredregill | director | 7550 MERIDIAN CIRCLE N., SUITE # 150, MAPLE GROVE MN 55369 |
Jose Antonio Peris | director | 7550 MERIDIAN CIRCLE N., SUITE # 150, MAPLE GROVE MN 55369 |
David B Kunin | director | 7201 METRO BOULEVARD, MINNEAPOLIS MN 55439 |
David J. Graff | director | 7550 MERIDIAN CIRCLE N., SUITE 150, MAPLE GROVE MN 55369 |
Daniel Ramon Everingham | 10 percent owner | 617 COUNTRY VIEW LANE, GARLAND TX 75043 |
Jay D Miller | director | 7550 MERIDIAN CIR N, SUITE 150, MAPLE GROVE MN 55369 |
Christopher Dean Jones | officer: CFO | 7550 MERIDIAN CIRCLE N., SUITE 150, MAPLE GROVE MN 55369 |
Stacy A Kruse | director | 7401 BOONE AVENUE NORTH, BROOKLYN PARK MN 55428 |
Philip Irving Smith | director | 4503 BROWNDALE AVENUE, EDINA MN 55424 |
Dan Sachs | director | 7550 MERIDIAN CIRCLE N., MAPLE GROVE MN 55369 |
Steven J Rosenstone | director | 7550 MERIDIAN CIR N, SUITE 150, MAPLE GROVE MN 55369 |
Heidi B Grange | officer: Senior Vice President of HR | 7550 MERIDIAN CIRCLE N, MAPLE GROVE MN 55369 |
John Lindeen | officer: Sr VP - Global Operations | 7550 MERIDIAN CIRCLE N, SUITE 150, MAPLE GROVE MN 55369 |
Beck Constance | officer: Chief Financial Officer | NORTECH SYSTEMS INCORPORATED, 7550 MERDIAN CIRCLE N, MAPLE GROVE MN 55369 |
Matt Mahmood | officer: Chief Operating Officer | 7550 MERIDIAN CIRCLE N, SUITE 150, MAPLE GROVE MN 55369 |
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