Zep (FRA:14Z) ROIC % : 1.45% (As of Feb. 2015)

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What is Zep ROIC %?

ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Zep's annualized return on invested capital (ROIC %) for the quarter that ended in Feb. 2015 was 1.45%.

As of today (2024-05-27), Zep's WACC % is 0.00%. Zep's ROIC % is 4.96% (calculated using TTM income statement data). Zep 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.

Zep ROIC % Historical Data

The historical data trend for Zep'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.

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Zep ROIC % Chart

Zep Annual Data

Trend

Aug05

Aug06

Aug07

Aug08

Aug09

Aug10

Aug11

Aug12

Aug13

Aug14

ROIC %

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8.41

8.12

8.43

5.53

4.66

Zep Quarterly Data
	May10	Aug10	Nov10	Feb11	May11	Aug11	Nov11	Feb12	May12	Aug12	Nov12	Feb13	May13	Aug13	Nov13	Feb14	May14	Aug14	Nov14	Feb15
ROIC %	Get a 7-Day Free Trial															1.82	6.40	6.23	4.59	1.45

Competitive Comparison of Zep's ROIC %

For the Specialty Chemicals subindustry, Zep'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.

Zep's ROIC % Distribution in the Chemicals Industry

For the Chemicals industry and Basic Materials sector, Zep's ROIC % distribution charts can be found below:

* The bar in red indicates where Zep's ROIC % falls into.

Zep ROIC % Calculation

Zep's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Aug. 2014 is calculated as:

	ROIC % (A: Aug. 2014 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Aug. 2013 )	+	Invested Capital (A: Aug. 2014 ))	/ count )
=	24.63 * ( 1 - 40.41% )	/	( (317.37	+	313.155)	/ 2 )
=	14.677017	/	315.2625
=	4.66 %

where

	Invested Capital		(A: Aug. 2013 )
=	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	))
=	411.366	-	92.192	-	( 1.804	-	max(0, 110.967	-	147.62	+	1.804	))
=	317.37

	Invested Capital		(A: Aug. 2014 )
=	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	))
=	417.714	-	93.817	-	( 10.742	-	max(0, 108.842	-	171.284	+	10.742	))
=	313.155

Zep's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Feb. 2015 is calculated as:

	ROIC % (Q: Feb. 2015 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Nov. 2014 )	+	Invested Capital (Q: Feb. 2015 ))	/ count )
=	9.248 * ( 1 - 43.7% )	/	( (340.097	+	379.86)	/ 2 )
=	5.206624	/	359.9785
=	1.45 %

where

	Invested Capital		(Q: Nov. 2014 )
=	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	))
=	439.661	-	96.201	-	( 3.363	-	max(0, 112.244	-	179.71	+	3.363	))
=	340.097

	Invested Capital		(Q: Feb. 2015 )
=	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	))
=	471.648	-	89.031	-	( 2.757	-	max(0, 106.652	-	187.991	+	2.757	))
=	379.86

Note: The Operating Income data used here is four times the quarterly (Feb. 2015) data.

Zep (FRA:14Z) 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, Zep's WACC % is 0.00%. Zep's ROIC % is 4.96% (calculated using TTM income statement data). Zep 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. Zep earns returns that do not match up to its cost of capital. It will destroy value as it grows.

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.

Zep ROIC % Related Terms

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Zep (FRA:14Z) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Chemicals » Zep Inc (FRA:14Z) » Definitions » ROIC %

Traded in Other Exchanges

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Address

Website

http://www.zepinc.com

Zep Inc. was founded in 1937. It is a producer, marketer, and service provider of a range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets. Zeps product portfolio includes anti-bacterial and industrial hand care products, cleaners, degreasers, deodorizers, disinfectants, floor finishes, sanitizers, and pest and weed control products. It continually refreshes its product portfolio and service offerings. Zep reaches its customers through an experienced, international organization of sales representatives supported by highly skilled marketing, research and development and technical services teams, who collectively provide creative solutions for its customers' diverse cleaning and maintenance needs by utilizing their product expertise and providing customized value added services that it distinguish Zep among its competitors. Through its direct sales organization, Zep provides convenient, highly effective cleaning and maintenance solutions to customers in a broad array of commercial, industrial, and institutional end-markets, including transportation, food processing and service, manufacturing, government, and housekeeping. These customers include government entities and businesses ranging from small sole proprietorships to large corporations. It sells its products to customers mainly in the United States, Canada and Western Europe. Zep markes these products and services under well recognized and established brand names, such as Zep , Zep Commercial, Zep Professional, Enforcer, and Selig. Zep is its flagship brand and represents largest portfolio of cleaning and maintenance solutions for commercial, industrial, and institutional customers needing highly effective product solutions and professional technical support. Zep Commercial provides professional cleaning and plumbing chemical products targeted to contractors and small business owners and are currently sold through The Home Depot, HD Supply and other retailers. Zep Professional was introduced in fiscal year 2009 and represents its portfolio of cleaning and maintenance solutions that are offered to customers in the commercial, industrial, and institutional end-markets who prefer to acquire product through the distribution channel. Selig offers a limited assortment of cleaning solutions targeted to commercial, industrial and institutional customers. It produces a range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer customers. Zeps commercial, industrial, and institutional customers include government entities and businesses ranging from small sole proprietorships to large corporations as well as distributors. Its sales and service organization covers the United States, Canada, Italy, Belgium, Luxemburg, the Netherlands and certain other smaller markets. It manufactures products at six facilities located in the United States, Canada, the Netherlands, and Italy.The key raw materi

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