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The Toro Co ROIC %

: 17.61% (As of Jul. 2019)
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Return on invested capital measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. The Toro Co's annualized return on invested capital (ROIC) for the quarter that ended in Jul. 2019 was 17.61%.

As of today (2019-10-17), The Toro Co's WACC % is 7.68%. The Toro Co's return on invested capital is 27.61% (calculated using TTM income statement data). The Toro Co 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 Toro Co 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.

The Toro Co Annual Data
Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Oct17 Oct18
ROIC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 41.11 35.04 34.85 42.52 40.93

The Toro Co Quarterly Data
Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17 Oct17 Jan18 Apr18 Jul18 Oct18 Jan19 Apr19 Jul19
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 43.68 21.95 32.88 42.32 17.61

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.


The Toro Co ROIC % Distribution

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



The Toro Co ROIC % Calculation

The Toro Co's annualized Return on Invested Capital (ROIC) for the fiscal year that ended in Oct. 2018 is calculated as:

Return on Invested Capital(A: Oct. 2018 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (A: Oct. 2017 ) + Invested Capital (A: Oct. 2018 ))/2)
=373.085 * ( 1 - 26.98% )/( (638.723 + 692.341)/2)
=272.426667/665.532
=40.93 %

where

Invested Capital(A: Oct. 2017 )
=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
=305.629 + 26.258 + 0 + 617.092 - 310.256
=638.723

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
=312.549 + 0 + 0 + 668.916 - 289.124
=692.341

The Toro Co's annualized Return on Invested Capital (ROIC) for the quarter that ended in Jul. 2019 is calculated as:

Return on Invested Capital(Q: Jul. 2019 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Apr. 2019 ) + Invested Capital (Q: Jul. 2019 ))/2)
=295.776 * ( 1 - 14.92% )/( (1436.278 + 1421.186)/2)
=251.6462208/1428.732
=17.61 %

where

Invested Capital(Q: Apr. 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
=721.079 + 90 + 0 + 805.277 - 180.078
=1436.278

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
=620.804 + 99.877 + 0 + 843.822 - 143.317
=1421.186

Note: The Operating Income data used here is four times the quarterly (Jul. 2019) data.

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


The Toro Co  (NYSE:TTC) ROIC % Explanation

Return on Invested Capital 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 Return on Capital 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, The Toro Co's WACC % is 7.68%. The Toro Co's return on invested capital is 27.61% (calculated using TTM income statement data). The Toro Co 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 Toro Co 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, ROC 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.


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