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Wal-Mart Stores Inc  (NYSE:WMT) ROIC %: 13.62% (As of Jul. 2017)

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 %. Wal-Mart Stores Inc's annualized return on invested capital (ROIC) for the quarter that ended in Jul. 2017 was 13.62%.

As of today, Wal-Mart Stores Inc's WACC % is 2.66%. Wal-Mart Stores Inc's return on invested capital is 12.97% (calculated using TTM income statement data). Wal-Mart Stores Inc 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.


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.

Wal-Mart Stores Inc Annual Data

Jan08 Jan09 Jan10 Jan11 Jan12 Jan13 Jan14 Jan15 Jan16 Jan17
ROIC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 15.26 13.94 14.29 13.34 12.98

Wal-Mart Stores Inc Quarterly Data

Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17
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 14.33 11.88 14.34 11.99 13.62

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.


Calculation

Wal-Mart Stores Inc's annualized Return on Invested Capital (ROIC) for the fiscal year that ended in Jan. 2017 is calculated as:

Return on Invested Capital(A: Jan. 2017 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (A: Jan. 2016 ) + Invested Capital (A: Jan. 2017 ))/2)
=22764 * ( 1 - 30.27% )/( (124940 + 119606)/2)
=15873.3372/122273
=12.98 %

where

Invested Capital(A: Jan. 2016 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash
=44030 + 6004 + 3065 + 80546 - 8705
=124940

Invested Capital(A: Jan. 2017 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash
=42018 + 3920 + 2737 + 77798 - 6867
=119606

Wal-Mart Stores Inc's annualized Return on Invested Capital (ROIC) for the quarter that ended in Jul. 2017 is calculated as:

Return on Invested Capital(Q: Jul. 2017 )
=NOPAT/Average Invested Capital
=Operating Income*(1-Tax Rate)/( (Invested Capital (Q: Apr. 20 ) + Invested Capital (Q: Jul. 2017 ))/2)
=23876 * ( 1 - 32.61% )/( (116066 + 120220)/2)
=16090.0364/118143
=13.62 %

where

Invested Capital(Q: Apr. 20 )
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash
=40025 + 6472 + 2423 + 73691 - 6545
=116066

Invested Capital(Q: {Q1})
=Book Value of Debt + Book Value of Equity - Cash
=Long-Term Debt & Capital Lease Obligation + Current Portion of Long-Term Debt + Minority Interest + Total Equity - Cash
=40469 + 7174 + 2657 + 76389 - 6469
=120220

Note: The Operating Income data used here is four times the quarterly (Jul. 2017) operating income data.

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


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 rather than net income in the numerator. The second is the tax adjustment to this operating income, 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 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, Wal-Mart Stores Inc's WACC % is 2.66%. Wal-Mart Stores Inc's return on invested capital is 12.97% (calculated using TTM income statement data). Wal-Mart Stores Inc 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. Wal-Mart Stores Inc 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.


Related Terms


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