ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Sumitomo Forestry Co's annualized return on invested capital (ROIC %) for the quarter that ended in Jun. 2024 was 9.78%.
As of today (2024-12-12), Sumitomo Forestry Co's WACC % is 2.86%. Sumitomo Forestry Co's ROIC % is 10.01% (calculated using TTM income statement data).
Sumitomo Forestry Co 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.
* 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.
Competitive Comparison of Sumitomo Forestry Co's ROIC %
For the Residential Construction subindustry, Sumitomo Forestry Co'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.
Sumitomo Forestry Co's ROIC % Distribution in the Homebuilding & Construction Industry
For the Homebuilding & Construction industry and Consumer Cyclical sector, Sumitomo Forestry Co's ROIC % distribution charts can be found below:
* The bar in red indicates where Sumitomo Forestry Co's ROIC % falls into.
Sumitomo Forestry Co ROIC % Calculation
Sumitomo Forestry Co's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:
Note:
The Operating Income data used here is four times the quarterly (Jun. 2024) 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.
Sumitomo Forestry Co (FRA:5F6) 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, Sumitomo Forestry Co's WACC % is 2.86%. Sumitomo Forestry Co's ROIC % is 10.01% (calculated using TTM income statement data).
Sumitomo Forestry Co 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.
Sumitomo Forestry Co 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.
Sumitomo Forestry Co ROIC % Related Terms
Thank you for viewing the detailed overview of Sumitomo Forestry Co's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Sumitomo Forestry Co Ltd is a diversified Japanese company that focuses on timber and building materials as well as residential construction. The company's timber business is one of Japan's leading suppliers of timber and also provides building and structural materials such as flooring and doors. It constructs custom-built single-family housing projects around Japan that use the company's timber materials and design. These two business units provide the majority of the company's revenue. Sumitomo Forestry operates timber and exporting businesses in Southeast Asia, Australia, and North America. It is also involved in forestry management, as it owns forests around Japan and Southeast Asia.
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