Al-Arabiya Real Estate Co KSC (KUW:ARABREC) ROIC % : 2.71% (As of Sep. 2024)

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What is Al-Arabiya Real Estate Co KSC 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 %. Al-Arabiya Real Estate Co KSC's annualized return on invested capital (ROIC %) for the quarter that ended in Sep. 2024 was 2.71%.

As of today (2025-03-02), Al-Arabiya Real Estate Co KSC's WACC % is 7.11%. Al-Arabiya Real Estate Co KSC's ROIC % is -2.69% (calculated using TTM income statement data). Al-Arabiya Real Estate Co KSC earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Al-Arabiya Real Estate Co KSC ROIC % Historical Data

The historical data trend for Al-Arabiya Real Estate Co KSC'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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Al-Arabiya Real Estate Co KSC ROIC % Chart

Al-Arabiya Real Estate Co KSC Annual Data

Trend

Dec10

Dec11

Dec16

Dec17

Dec18

Dec19

Dec20

Dec21

Dec22

Dec23

ROIC %

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0.82

-0.14

0.58

1.30

1.16

Al-Arabiya Real Estate Co KSC Quarterly Data
	Dec19	Mar20	Jun20	Sep20	Dec20	Mar21	Jun21	Sep21	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24
ROIC %	Get a 7-Day Free Trial															0.75	-3.48	-3.46	-6.27	2.71

Competitive Comparison of Al-Arabiya Real Estate Co KSC's ROIC %

For the Real Estate Services subindustry, Al-Arabiya Real Estate Co KSC'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.

Al-Arabiya Real Estate Co KSC's ROIC % Distribution in the Real Estate Industry

For the Real Estate industry and Real Estate sector, Al-Arabiya Real Estate Co KSC's ROIC % distribution charts can be found below:

* The bar in red indicates where Al-Arabiya Real Estate Co KSC's ROIC % falls into.

Al-Arabiya Real Estate Co KSC ROIC % Calculation

Al-Arabiya Real Estate Co KSC'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 )
=	2.26 * ( 1 - 3.18% )	/	( (178.237	+	200.588)	/ 2 )
=	2.188132	/	189.4125
=	1.16 %

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	))
=	138.523	-	3.49	-	( 1.723	-	max(0, 47.437	-	4.233	+	1.723	))
=	178.237

	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	))
=	122.912	-	2.122	-	( 2.039	-	max(0, 85.459	-	5.661	+	2.039	))
=	200.588

Al-Arabiya Real Estate Co KSC's annualized Return on Invested Capital (ROIC %) for the quarter that ended in Sep. 2024 is calculated as:

	ROIC % (Q: Sep. 2024 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Jun. 2024 )	+	Invested Capital (Q: Sep. 2024 ))	/ count )
=	3.58 * ( 1 - 14.92% )	/	( (113.401	+	111.152)	/ 2 )
=	3.045864	/	112.2765
=	2.71 %

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	))
=	112.29	-	3.102	-	( 2.917	-	max(0, 11.702	-	7.489	+	2.917	))
=	113.401

	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	))
=	108.914	-	2.156	-	( 0.219	-	max(0, 10.416	-	6.022	+	0.219	))
=	111.152

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

Al-Arabiya Real Estate Co KSC (KUW:ARABREC) 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, Al-Arabiya Real Estate Co KSC's WACC % is 7.11%. Al-Arabiya Real Estate Co KSC's ROIC % is -2.69% (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.

Al-Arabiya Real Estate Co KSC ROIC % Related Terms

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Al-Arabiya Real Estate Co KSC Business Description

Industry

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Address

Ahmad Al-Jaber Street, 7th Floor, Emad Commercial Center, PO Box 26980, Sharq, Safat, Kuwait City, KWT, 13130

Website

http://www.arec-kwt.com

Al-Arabiya Real Estate Co KSC is a Kuwait based company involved in the construction, contracting, developing and managing the activities of residential buildings, hotels, and commercial centres within the private and public sector. It operates in three segments. Real estate segment involves activities related to real estate investment properties. Hotels segment, which is the key revenue generator, involves establishment, acquiring and managing hotels. Investment segment involves investing in shares and share capital of the companies. Geographically, it generates revenue from Kuwait being the highest revenue driver, United Arab Emirates, and Egypt.

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