ROC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROIC %. BAE Systems's annualized return on capital (ROC %) for the quarter that ended in Dec. 2025 was 7.40%.
As of today (2026-06-24), BAE Systems's WACC % is 4.89%. BAE Systems's ROC % is 6.76% (calculated using TTM income statement data).
BAE Systems 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.
BAE Systems (XTER:BSP) 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, BAE Systems's WACC % is 4.89%. BAE Systems's ROC % is 6.76% (calculated using TTM income statement data).
BAE Systems 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.
BAE Systems ROC % Related Terms
BAE Systems ROC % Historical Data
* Premium members only.
The historical data trend for BAE Systems'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.
Note:
The Operating Income data used here is two times the semi-annual (Dec. 2025) data.
The tax rate is limited to between 0% and 100%.
* 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.
BAE Systems (XTER:BSP) has a ROC % of 7.40% as of Dec. 2025. Return on capital is the ratio of current-period net income to average two-period capital. View historical data on BAE Systems and its competitors.
Is BAE Systems' ROC % too high?
BAE Systems' current ROC % is 7.40%. The Aerospace & Defense industry median ROC % is 4.45. BAE Systems' value of 7.40% is 66.3% above this industry median. Overall, BAE Systems has a GF Score™ of 86/100 and is considered Fairly Valued, reflecting its overall financial health beyond just this single metric.
How does BAE Systems' ROC % compare to GE and RTX?
BAE Systems' ROC % of 7.40% can be compared against companies in the Aerospace & Defense industry. The industry median ROC % is 4.45. BAE Systems' value of 7.40% is 66.3% above this benchmark. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good ROC % for an Aerospace & Defense company?
The median ROC % among Aerospace & Defense companies is 4.45, based on 351 companies in the industry. Companies in the top quartile (top 25%) have a ROC % significantly above this median, while those in the bottom quartile fall well below. However, ROC % should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. BAE Systems's current ROC % of 7.40% is 66.3% above the industry median. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high ROC % mean?
A high ROC % can signal that a stock is expensive relative to its fundamentals. Return on capital is the ratio of current-period net income to average two-period capital. View historical data on BAE Systems and its competitors. For the Aerospace & Defense industry, the median ROC % is 4.45 — values significantly above this may indicate overvaluation, while values below may suggest a bargain or underlying issues. BAE Systems's current ROC % is 7.40%. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is BAE Systems stock overvalued right now?
Based on GuruFocus' analysis, BAE Systems (XTER:BSP) is currently considered Fairly Valued. The stock's GF Value™ is €19.49, compared to a current price of €21.17 — trading 8.6% above its estimated fair value. The current ROC % is 7.40% and 66.3% above the Aerospace & Defense industry median of 4.45. BAE Systems' overall GF Score™ is 86/100 with 2 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is ROC % calculated?
ROC % is calculated from a company's financial statements. For BAE Systems (XTER:BSP), the current ROC % is 7.40% as of Dec. 2025. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is BAE Systems (XTER:BSP) Overvalued in 2026?
Based on GuruFocus' analysis, BAE Systems stock appears to be overvalued.
The current stock price of €21.17 is trading 8.6% above its estimated GF Value™ of €19.49.
GuruFocus considers BAE Systems to be Fairly Valued.
Key valuation signals for XTER:BSP:
ROC %: 7.40%
GF Value™: €19.49 vs. price of €21.17 (8.6% above fair value)
Industry Position: 66.3% above the Aerospace & Defense median
No single metric tells the full story. See the XTER:BSP stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
BAE Systems is a British global defense, security, and aerospace company and the largest defense contractor in Europe; it is one of six prime contractors to the US Department of Defense. For reporting purposes, the company has five operating segments: electronics systems is the group's US- and UK-based electronic warfare systems; the cyber, security, and intelligence segment supplies intelligence and security solutions to the US government; platforms and services manufactures combat vehicles and munitions and performs ship repair services to the US Defense Department; the air segment includes BAE's share of US and European air programs as well as its businesses in Saudi Arabia and Australia, and the maritime segment comprises UK land- and marine-based activities.
86GF Score
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