Switch to:

Hormel Foods ROIC %

: 16.38% (As of Jan. 2020)
View and export this data going back to 1990. Start your Free Trial

ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Hormel Foods's annualized return on invested capital (ROIC %) for the quarter that ended in Jan. 2020 was 16.38%.

As of today (2020-03-29), Hormel Foods's WACC % is 2.06%. Hormel Foods's ROIC % is 16.63% (calculated using TTM income statement data). Hormel Foods 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.


Hormel Foods ROIC % 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.

Hormel Foods Annual Data
Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Oct17 Oct18 Oct19
ROIC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 18.18 20.77 18.15 18.56 16.64

Hormel Foods Quarterly Data
Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Oct17 Jan18 Apr18 Jul18 Oct18 Jan19 Apr19 Jul19 Oct19 Jan20
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 16.01 18.78 13.98 17.71 16.38

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.


Hormel Foods ROIC % Distribution

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



Hormel Foods ROIC % Calculation

Hormel Foods's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Oct. 2019 is calculated as:

ROIC %(A: Oct. 2019 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (A: Oct. 2018 ) + Invested Capital (A: Oct. 2019 ))/ count )
=1157.064 * ( 1 - 19.06% )/( (5770.522 + 5487.898)/ 2 )
=936.5276016/5629.21
=16.64 %

where

Invested Capital(A: Oct. 2018 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation + Minority Interest + Total Stockholders Equity - Cash
=624.84 + 0 + 4.007 + 5600.811 - 459.136
=5770.522

Invested Capital(A: Oct. 2019 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation + Minority Interest + Total Stockholders Equity - Cash
=250 + 0 + 4.077 + 5921.458 - 687.637
=5487.898

Hormel Foods's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Jan. 2020 is calculated as:

ROIC %(Q: Jan. 2020 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Oct. 2019 ) + Invested Capital (Q: Jan. 2020 ))/ count )
=1091.6 * ( 1 - 16.27% )/( (5487.898 + 5674.049)/ 2 )
=913.99668/5580.9735
=16.38 %

where

Invested Capital(Q: Oct. 2019 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation + Minority Interest + Total Stockholders Equity - Cash
=250 + 0 + 4.077 + 5921.458 - 687.637
=5487.898

Invested Capital(Q: {Q1})
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Short-Term Debt & Capital Lease Obligation + Minority Interest + Total Stockholders Equity - Cash
=308.972 + 8.259 + 4.281 + 6091.764 - 739.227
=5674.049

Note: The Operating Income data used here is four times the quarterly (Jan. 2020) data.

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Hormel Foods  (NYSE:HRL) 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, Hormel Foods's WACC % is 2.06%. Hormel Foods's ROIC % is 16.63% (calculated using TTM income statement data). Hormel Foods 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. Hormel Foods 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.


Hormel Foods ROIC % Related Terms


Hormel Foods ROIC % Headlines

No Headline

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)