ARM Holdings (MEX:ARM) ROC % : 8.47% (As of Sep. 2024)

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What is ARM Holdings 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 %. ARM Holdings's annualized return on capital (ROC %) for the quarter that ended in Sep. 2024 was 8.47%.

As of today (2024-12-15), ARM Holdings's WACC % is 10.18%. ARM Holdings's ROC % is 10.83% (calculated using TTM income statement data). ARM Holdings 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.

ARM Holdings ROC % Historical Data

The historical data trend for ARM Holdings'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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ARM Holdings ROC % Chart

ARM Holdings Annual Data

Trend

Mar21

Mar22

Mar23

Mar24

ROC %

12.82

11.37

3.79

ARM Holdings Quarterly Data
	Mar21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24
ROC %	Get a 7-Day Free Trial							-13.00	7.45	7.78	14.62	8.47

ARM Holdings ROC % Calculation

ARM Holdings's annualized Return on Capital (ROC %) for the fiscal year that ended in Mar. 2024 is calculated as:

	ROC % (A: Mar. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Mar. 2023 )	+	Invested Capital (A: Mar. 2024 ))	/ count )
=	1941.762 * ( 1 - -44.34% )	/	( (76966.75	+	71031.971)	/ 2 )
=	2802.7392708	/	73999.3605
=	3.79 %

where

	Invested Capital		(A: Mar. 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	))
=	123759.65	-	7606.55	-	( 39925.375	-	max(0, 24568.075	-	63754.425	+	39925.375	))
=	76966.75

	Invested Capital		(A: Mar. 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	))
=	131558.513	-	15849.424	-	( 48510.853	-	max(0, 24977.364	-	69654.482	+	48510.853	))
=	71031.971

ARM Holdings's annualized Return on Capital (ROC %) for the quarter that ended in Sep. 2024 is calculated as:

	ROC % (Q: Sep. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Jun. 2024 )	+	Invested Capital (Q: Sep. 2024 ))	/ count )
=	5040.716 * ( 1 - -67.19% )	/	( (95759.179	+	103177.173)	/ 2 )
=	8427.5730804	/	99468.176
=	8.47 %

where

	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	))
=	144362.412	-	3444.179	-	( 45159.054	-	max(0, 19510.91	-	70349.196	+	45159.054	))
=	95759.179

	Invested Capital		(Q: Sep. 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	))
=	159215.766	-	9608.866	-	( 46429.727	-	max(0, 17701.58	-	80021.379	+	46429.727	))
=	103177.173

Note: The Operating Income data used here is four times the quarterly (Sep. 2024) data.

ARM Holdings (MEX:ARM) 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, ARM Holdings's WACC % is 10.18%. ARM Holdings's ROC % is 10.83% (calculated using TTM income statement data). ARM Holdings 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.

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ARM Holdings Business Description

Industry

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ARM:USA O9T:Germany

Address

110 Fulbourn Road, Cambridge, GBR, CB1 9NJ

Website

https://www.arm.com

Arm Holdings is the IP owner and developer of the ARM architecture (ARM stands for Acorn RISC Machine), which is used in 99% of the world's smartphone CPU cores, and it also has high market share in other battery-powered devices like wearables, tablets, or sensors. Arm licenses its architecture for a fee, offering different types of licenses depending on the flexibility the customer needs. Customers like Apple or Qualcomm buy architectural licenses, which allows them to modify the architecture and add or delete instructions to tailor the chips to their specific needs. Other clients directly buy off-the-shelf designs from Arm. Off-the-shelf and architectural customers pay a royalty fee per chip shipped.