Otis Worldwide (MEX:OTIS) ROC % : 20.07% (As of Sep. 2024)

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What is Otis Worldwide 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 %. Otis Worldwide's annualized return on capital (ROC %) for the quarter that ended in Sep. 2024 was 20.07%.

As of today (2024-12-12), Otis Worldwide's WACC % is 9.24%. Otis Worldwide's ROC % is 22.79% (calculated using TTM income statement data). Otis Worldwide 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.

Otis Worldwide ROC % Historical Data

The historical data trend for Otis Worldwide'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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Otis Worldwide ROC % Chart

Otis Worldwide Annual Data

Trend

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROC %

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19.62

15.79

18.83

18.03

19.83

Otis Worldwide Quarterly Data
	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24
ROC %	Get a 7-Day Free Trial															23.81	20.83	23.14	26.76	20.07

Otis Worldwide ROC % Calculation

Otis Worldwide'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 )
=	37105.706 * ( 1 - 26.24% )	/	( (152731.664	+	123300.938)	/ 2 )
=	27369.1687456	/	138016.301
=	19.83 %

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	))
=	191431.224	-	52346.76	-	( 23180.744	-	max(0, 133411.128	-	119763.928	+	23180.744	))
=	152731.664

	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	))
=	171728.467	-	49768.495	-	( 21625.192	-	max(0, 109976.153	-	108635.187	+	21625.192	))
=	123300.938

Otis Worldwide'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 )
=	28590.316 * ( 1 - -8.79% )	/	( (148026.432	+	161854.265)	/ 2 )
=	31103.4047764	/	154940.3485
=	20.07 %

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	))
=	180599.576	-	62929.554	-	( 17257.537	-	max(0, 144637.213	-	114280.803	+	17257.537	))
=	148026.432

	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	))
=	202042.168	-	71731.763	-	( 16283.878	-	max(0, 159432.359	-	127888.499	+	16283.878	))
=	161854.265

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

Otis Worldwide (MEX:OTIS) 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, Otis Worldwide's WACC % is 9.24%. Otis Worldwide's ROC % is 22.79% (calculated using TTM income statement data). Otis Worldwide 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.

Otis Worldwide ROC % Related Terms

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Otis Worldwide Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » Otis Worldwide Corp (MEX:OTIS) » Definitions » ROC %

Comparable Companies

Traded in Other Exchanges

OTIS:USA 4PG:Germany O1TI34:Brazil OTIS:Austria

Address

One Carrier Place, Farmington, CT, USA, 06032

Website

https://www.otis.com

Otis is the largest global elevator and escalator supplier by revenue with around 18% global market share. In 1854 Otis' founder and namesake Elisha Graves Otis, invented a safety mechanism that prevented elevators from falling if the hoisting cable failed. The company's product and service lifecycle begins with installations of elevator units in new buildings, later selling maintenance services on the units, and eventually replacement of the units after the average 15- to 20-year useful life of an elevator. As the largest global OEM, Otis has amassed an installed base under service that exceeds 2 million elevators. Its business model is similar to that of its closest competitors Kone, Schindler, and TK Elevator.