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ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Avanos Medical's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 3.79%.
As of today (2024-05-01), Avanos Medical's WACC % is 8.24%. Avanos Medical's ROIC % is -2.85% (calculated using TTM income statement data). Avanos Medical earns returns that do not match up to its cost of capital. It will destroy value as it grows.
The historical data trend for Avanos Medical's ROIC % 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.
Avanos Medical Annual Data | |||||||||||||||||||||
Trend | Dec14 | Dec15 | Dec16 | Dec17 | Dec18 | Dec19 | Dec20 | Dec21 | Dec22 | Dec23 | |||||||||||
ROIC % | Get a 7-Day Free Trial | -3.10 | -1.48 | -2.07 | 2.00 | 0.36 |
Avanos Medical Quarterly Data | ||||||||||||||||||||
Mar19 | Jun19 | Sep19 | Dec19 | Mar20 | Jun20 | Sep20 | Dec20 | Mar21 | Jun21 | Sep21 | Dec21 | Mar22 | Jun22 | Sep22 | Dec22 | Mar23 | Jun23 | Sep23 | Dec23 | |
ROIC % | Get a 7-Day Free Trial | 2.99 | 0.87 | -0.48 | 1.11 | 3.79 |
For the Medical Devices subindustry, Avanos Medical's ROIC %, along with its competitors' market caps and ROIC % data, can be viewed below:
* 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. Note that "N/A" values will not show up in the chart.
For the Medical Devices & Instruments industry and Healthcare sector, Avanos Medical's ROIC % distribution charts can be found below:
* The bar in red indicates where Avanos Medical's ROIC % falls into.
Avanos Medical's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:
ROIC % (A: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (A: Dec. 2022 ) | + | Invested Capital (A: Dec. 2023 )) | / count ) |
= | 4.2 * ( 1 - -25.32% ) | / | ( (1493.5 | + | 1455.2) | / 2 ) |
= | 5.26344 | / | 1474.35 | |||
= | 0.36 % |
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 | )) |
= | 1786.9 | - | 165.7 | - | ( 127.7 | - | max(0, 191 | - | 624.1 | + | 127.7 | )) |
= | 1493.5 |
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 | )) |
= | 1692.4 | - | 149.5 | - | ( 87.7 | - | max(0, 234.6 | - | 487 | + | 87.7 | )) |
= | 1455.2 |
Avanos Medical's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Dec. 2023 is calculated as:
ROIC % (Q: Dec. 2023 ) | ||||||
= | NOPAT | / | Average Invested Capital | |||
= | Operating Income * ( 1 - Tax Rate % ) | / | ( (Invested Capital (Q: Sep. 2023 ) | + | Invested Capital (Q: Dec. 2023 )) | / count ) |
= | 44.8 * ( 1 - -23.6% ) | / | ( (1468.5 | + | 1455.2) | / 2 ) |
= | 55.3728 | / | 1461.85 | |||
= | 3.79 % |
where
Invested Capital | (Q: Sep. 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 | )) |
= | 1724.9 | - | 149.3 | - | ( 107.1 | - | max(0, 170.7 | - | 524.6 | + | 107.1 | )) |
= | 1468.5 |
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 | )) |
= | 1692.4 | - | 149.5 | - | ( 87.7 | - | max(0, 234.6 | - | 487 | + | 87.7 | )) |
= | 1455.2 |
Note: The Operating Income data used here is four times the quarterly (Dec. 2023) data.
* 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.
Avanos Medical (NYSE:AVNS) ROIC % Explanation
ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. 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 ROIC % 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, Avanos Medical's WACC % is 8.24%. Avanos Medical's ROIC % is -2.85% (calculated using TTM income statement data).
Be Aware
Like ROE % and ROA %, ROIC % 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.
Thank you for viewing the detailed overview of Avanos Medical's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Sudhakar Varshney | officer: SVP, Global Supply Chain | 5405 WINDWARD PARKWAY, SUITE 100 SOUTH, ALPHARETTA GA 30004 |
Lisa Egbuonu-davis | director | C/O OMEGA HEALTHCARE INVESTORS, INC., 303 INTERNATIONAL CIRCLE, SUITE 200, HUNT VALLEY MD 21030 |
John Joseph Hurley | officer: Principal Accounting Officer | 5405 WINDWARD PARKWAY, ALPHARETTA GA 30004 |
Patrick J Oleary | director | 31515 BALLANTYNE CORP, C/O SPX CORP, CHARLOTTE NC 28277 |
Mojirade James | officer: SVP, General Counsel | 5405 WINDWARD PKWY, ALPHARETTA GA 30004 |
Kerr Holbrook | officer: SVP, GM Chronic Care | 5405 WINDWARD PKWY, ALPHARETTA GA 30004 |
Michael Greiner | officer: SVP - Chief Financial Officer | C/O VISTAPRINT, 95 HAYDEN AVENUE, LEXINGTON MA 02421 |
David Edward Ball | officer: SVP - Global Supply Chain | AVANOS MEDICAL, INC., 5405 WINDWARD PKWY, ALPHARETTA GA 30004 |
William David Haydon | officer: SVP, GM Pain Franchise | 5405 WINDWARD PARKWAY, ALPHARETTA GA 30004 |
Arjun Ranjan Sarker | officer: Senior VP, International | HALYARD HEALTH, INC., 5405 WINDWARD PARKWAY, ALPHARETTA GA 30004 |
Gary Blackford | director | 7700 FRANCE AVENUE SOUTH, EDINA MN 55435 |
Joseph Fralin Woody | director, officer: Chief Executive Officer | 5405 WINDWARD PARKWAY, SUITE 100 SOUTH, ALPHARETTA GA 30004 |
Steven E Voskuil | officer: See Remarks | 5405 WINDWARD PARKWAY, ALPHARETTA GA 30004 |
John W Wesley | director | 5405 WINDWARD PARKWAY, ALPHARETTA GA 30004 |
John Raymond Tushar | officer: President, Global Franchises | HALYARD HEALTH, INC., 5405 WINDWARD PARKWAY, ALPHARETTA GA 30004 |
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