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Mohawk Industries Inc  (NYSE:MHK) Forward Rate of Return (Yacktman) %: 24.82% (As of Jun. 2017)

Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. Mohawk Industries Inc's forward rate of return for was 24.82%.

NYSE:MHK' s Forward Rate of Return (Yacktman) % Range Over the Past 10 Years
Min: 2.2   Max: 34.6
Current: 24.72

2.2
34.6

During the past 13 years, Mohawk Industries Inc's highest Forward Rate of Return was 34.60. The lowest was 2.20. And the median was 15.50.

NYSE:MHK's Forward Rate of Return (Yacktman) % is ranked higher than
81% of the 419 Companies
in the Global industry.

( Industry Median: 6.56 vs. NYSE:MHK: 24.72 )

Unlike the Earnings Yield %, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.


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.

Mohawk Industries Inc Annual Data

Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
Forward Rate of Return (Yacktman) % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 4.77 2.49 15.94 16.09 23.91

Mohawk Industries Inc Quarterly Data

Sep12 Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17
Forward Rate of Return (Yacktman) % 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 20.23 22.24 23.91 24.35 24.82

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

Forward Rate of Return is a concept that Don Yacktman uses in his investment approach. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. He said in the interview (March 2012, when the S&P 500 was at about 1400):

If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.

The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).

Mohawk Industries Inc's Forward Rate of Return of Jun. 2017 is

Forward Rate of Return=Normalized Free Cash Flow/Price+Growth rate
=4.63314286/241.69+0.229
=24.82 %

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


Explanation

Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.

For the growth part of the Forward Rate of Return calculation, GuruFocus uses the lower of total revenue growth or per share revenue growth, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over seven years. The reason we use seven years is because research shows that seven years is the length of the typical business cycle.


Be Aware

In the Forward Rate of Return calculation, the growth rate is added directly to today's free cash flow yield. Therefore the calculation is reliable only if the company can grow at the same rate in the future as it did in the past. Investors should pay close attention to this when researching growth stocks. More accurate measurement return returns are Return on Capital.


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