IHG (InterContinental Hotels Group) ROC % : 17.85% (As of Jun. 2024)

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What is InterContinental Hotels Group ROC %?

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. InterContinental Hotels Group's annualized return on capital (ROC %) for the quarter that ended in Jun. 2024 was 17.85%.

As of today (2024-12-11), InterContinental Hotels Group's WACC % is 9.60%. InterContinental Hotels Group's ROC % is 17.13% (calculated using TTM income statement data). InterContinental Hotels Group 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.

InterContinental Hotels Group ROC % Historical Data

The historical data trend for InterContinental Hotels Group's ROC % 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.

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InterContinental Hotels Group ROC % Chart

InterContinental Hotels Group Annual Data

Trend

Dec14

Dec15

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROC %

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13.71

3.72

8.91

12.50

18.72

InterContinental Hotels Group Semi-Annual Data
	Dec14	Jun15	Dec15	Jun16	Dec16	Jun17	Dec17	Jun18	Dec18	Jun19	Dec19	Jun20	Dec20	Jun21	Dec21	Jun22	Dec22	Jun23	Dec23	Jun24
ROC %	Get a 7-Day Free Trial															14.23	11.56	25.48	15.51	17.85

InterContinental Hotels Group ROC % Calculation

InterContinental Hotels Group's annualized Return on Capital (ROC %) for the fiscal year that ended in Dec. 2023 is calculated as:

	ROC % (A: Dec. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Dec. 2022 )	+	Invested Capital (A: Dec. 2023 ))	/ count )
=	1034 * ( 1 - 25.74% )	/	( (3688	+	4514)	/ 2 )
=	767.8484	/	4101
=	18.72 %

where

	Invested Capital		(A: Dec. 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	))
=	4216	-	394	-	( 929	-	max(0, 1544	-	1678	+	929	))
=	3688

	Invested Capital		(A: Dec. 2023 )
=	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	))
=	4813	-	360	-	( 1273	-	max(0, 2190	-	2129	+	1273	))
=	4514

InterContinental Hotels Group's annualized Return on Capital (ROC %) for the quarter that ended in Jun. 2024 is calculated as:

	ROC % (Q: Jun. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Dec. 2023 )	+	Invested Capital (Q: Jun. 2024 ))	/ count )
=	1062 * ( 1 - 26.48% )	/	( (4514	+	4235)	/ 2 )
=	780.7824	/	4374.5
=	17.85 %

where

	Invested Capital		(Q: Dec. 2023 )
=	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	))
=	4813	-	360	-	( 1273	-	max(0, 2190	-	2129	+	1273	))
=	4514

	Invested Capital		(Q: Jun. 2024 )
=	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	))
=	4576	-	665	-	( 858	-	max(0, 2123	-	1799	+	858	))
=	4235

Note: The Operating Income data used here is two times the semi-annual (Jun. 2024) data.

InterContinental Hotels Group (NYSE:IHG) ROC % Explanation

ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. 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 ROC % 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, InterContinental Hotels Group's WACC % is 9.60%. InterContinental Hotels Group's ROC % is 17.13% (calculated using TTM income statement data). InterContinental Hotels Group 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.

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.

InterContinental Hotels Group ROC % Related Terms

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InterContinental Hotels Group Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Travel & Leisure » InterContinental Hotels Group PLC (NYSE:IHG) » Definitions » ROC %

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ICHGF:USA IHG:Mexico IHGl:UK IHG:UK IC1B:Germany IC1H:Germany

Address

1 Windsor Dials, Arthur Road, Windsor, Berkshire, GBR, SL4 1RS

Website

https://www.ihgplc.com

InterContinental Hotels Group operates 946,000 rooms across 19 brands addressing the midscale through luxury segments, as of Dec. 31, 2023. Holiday Inn and Holiday Inn Express constitute the largest brand, while Hotel Indigo, Even, Hualuxe, Kimpton, and Voco are newer lifestyle brands experiencing strong demand. The company launched a midscale brand, Avid, in 2017 and closed on a 51% stake in Regent Hotels in 2018. It acquired Six Senses in 2019 and launched another midscale brand, Garner, in 2023. Managed and franchised represent 99% of total rooms. As of Dec. 31, 2023, the Americas represented 55% of total rooms, with Greater China accounting for 19% and Europe, Asia, the Middle East, and Africa making up 26%.