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Graco ROIC %

: 27.47% (As of Jun. 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 %. Graco's annualized return on invested capital (ROIC %) for the quarter that ended in Jun. 2022 was 27.47%.

As of today (2022-08-17), Graco's WACC % is 5.45%. Graco's ROIC % is 28.74% (calculated using TTM income statement data). Graco 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.


Graco ROIC % Historical Data

The historical data trend for Graco'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.

Graco 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 25.42 32.10 29.60 27.93 30.93

Graco Quarterly Data
Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21 Dec21 Mar22 Jun22
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 30.18 27.92 34.91 25.72 27.47

Competitive Comparison

For the Specialty Industrial Machinery subindustry, Graco'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.

   

Graco ROIC % Distribution

For the Industrial Products industry and Industrials sector, Graco's ROIC % distribution charts can be found below:

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



Graco ROIC % Calculation

Graco'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 )
=531.323 * ( 1 - 13.49% )/( (1410.892 + 1561.168)/ 2 )
=459.6475273/1486.03
=30.93 %

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))
=1988.128 - 198.327 - ( 378.909 - max(0, 321.389 - 1023.801+378.909))
=1410.892

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))
=2443.198 - 257.728 - ( 624.302 - max(0, 506.792 - 1363.621+624.302))
=1561.168

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

ROIC % (Q: Jun. 2022 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (Q: Mar. 2022 ) + Invested Capital (Q: Jun. 2022 ))/ count )
=594.72 * ( 1 - 19.79% )/( (1714.684 + 1758.23)/ 2 )
=477.024912/1736.457
=27.47 %

where

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))
=2319.445 - 224.274 - ( 380.487 - max(0, 402.313 - 1197.22+380.487))
=1714.684

Invested Capital(Q: Jun. 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))
=2404.278 - 232.689 - ( 413.359 - max(0, 424.058 - 1276.476+413.359))
=1758.23

Note: The Operating Income data used here is four times the quarterly (Jun. 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.


Graco  (NYSE:GGG) 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, Graco's WACC % is 5.45%. Graco's ROIC % is 28.74% (calculated using TTM income statement data). Graco 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. Graco 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.


Graco ROIC % Related Terms

Thank you for viewing the detailed overview of Graco's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.


Graco Business Description

Graco logo
Traded in Other Exchanges
Address
88-11th Avenue Northeast, Minneapolis, MN, USA, 55413
Graco manufactures equipment used for managing fluids, coatings, and adhesives, specializing in difficult-to-handle materials. Graco's business is organized into three segments: industrial, process, and contractor. The Minnesota-based firm serves a wide range of end markets, including industrial, automotive, and construction, and its broad array of products include pumps, valves, meters, sprayers, and equipment used to apply coatings, sealants, and adhesives. The firm generated roughly $2 billion in sales and $531 million in operating income in 2021.
Executives
Grasdal Inge officer: EVP, Corporate Development 88 11TH AVENUE NE MINNEAPOLIS MN 55413
Gargano Anthony J officer: President, Asia Pacific 88 11TH AVENUE NE MINNEAPOLIS MN 55413
Humke Joseph J officer: Executive Vice President 88 11TH AVENUE NE MINNEAPOLIS MN 55413
Carter Brett C director 414 NICOLLET MALL, 401-9 MINNEAPOLIS MN 55401
Schoenrock Kathryn L officer: Executive Vice President 88 11TH AVENUE NE MINNEAPOLIS MN 55413
Wheeler Kevin J. director A. O. SMITH CORPORATION 500 TENNESSEE WALTZ PARKWAY ASHLAND CITY TN 37015
Wordell Angela F officer: Executive VP, Operations 88 11TH AVENUE NE MINNEAPOLIS MN 55413
White Timothy R officer: President, EMEA 88 11TH AVENUE NE MINNEAPOLIS MN 55413
White Emily director C/O LULULEMON ATHLETICA INC. 1818 CORNWALL AVENUE VANCOUVER A1 V6J 1C7
Feragen Jody H director 1 HORMEL PLACE AUSTIN TX 55912
O'shea Peter J officer: Vice President 88 - 11TH AVENUE N.E. MINNEAPOLIS MN 55413
Eberlein Mark D officer: Vice President 88 - 11TH AVENUE N.E. MINNEAPOLIS MN 55413
Moreau Bernard J officer: Vice President 88 - 11TH AVENUE N.E. MINNEAPOLIS MN 55413
Rothe Christian E officer: Vice President and Treasurer 88 - 11TH AVENUE N.E. MINNEAPOLIS MN 55413
Etchart Eric director ROOM F, 22F CROSS REGION PLAZA 899 LINGLING ROAD SHANGHAI F4 200030

Graco Headlines

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