Arakawa Chemical Industries (TSE:4968) ROIC % : 0.05% (As of Dec. 2023)

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What is Arakawa Chemical Industries 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 %. Arakawa Chemical Industries's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 0.05%.

As of today (2024-05-25), Arakawa Chemical Industries's WACC % is 1.60%. Arakawa Chemical Industries's ROIC % is -4.65% (calculated using TTM income statement data). Arakawa Chemical Industries earns returns that do not match up to its cost of capital. It will destroy value as it grows.

Arakawa Chemical Industries ROIC % Historical Data

The historical data trend for Arakawa Chemical Industries'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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Arakawa Chemical Industries ROIC % Chart

Arakawa Chemical Industries Annual Data

Trend

Mar14

Mar15

Mar16

Mar17

Mar18

Mar19

Mar20

Mar21

Mar22

Mar23

ROIC %

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3.76

2.47

2.54

2.21

-3.58

Arakawa Chemical Industries 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															-7.05	-8.70	-3.95	-4.04	0.05

Competitive Comparison of Arakawa Chemical Industries's ROIC %

For the Specialty Chemicals subindustry, Arakawa Chemical Industries'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.

Arakawa Chemical Industries's ROIC % Distribution in the Chemicals Industry

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

* The bar in red indicates where Arakawa Chemical Industries's ROIC % falls into.

Arakawa Chemical Industries ROIC % Calculation

Arakawa Chemical Industries's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Mar. 2023 is calculated as:

	ROIC % (A: Mar. 2023 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (A: Mar. 2022 )	+	Invested Capital (A: Mar. 2023 ))	/ count )
=	-2908 * ( 1 - -18.98% )	/	( (95820	+	97519)	/ 2 )
=	-3459.9384	/	96669.5
=	-3.58 %

where

	Invested Capital		(A: Mar. 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	))
=	117739	-	11545	-	( 10374	-	max(0, 36474	-	62477	+	10374	))
=	95820

	Invested Capital		(A: Mar. 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	))
=	119035	-	10376	-	( 11140	-	max(0, 42113	-	62799	+	11140	))
=	97519

Arakawa Chemical Industries'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 )
=	-348 * ( 1 - 115.03% )	/	( (102214	+	102116)	/ 2 )
=	52.3044	/	102165
=	0.05 %

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	))
=	122720	-	9057	-	( 11449	-	max(0, 45573	-	63771	+	11449	))
=	102214

	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	))
=	124937	-	10446	-	( 12375	-	max(0, 42418	-	65791	+	12375	))
=	102116

Note: The Operating Income data used here is four times the quarterly (Dec. 2023) data.

Arakawa Chemical Industries (TSE:4968) 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, Arakawa Chemical Industries's WACC % is 1.60%. Arakawa Chemical Industries's ROIC % is -4.65% (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.

Arakawa Chemical Industries ROIC % Related Terms

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Arakawa Chemical Industries (TSE:4968) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Chemicals » Arakawa Chemical Industries Ltd (TSE:4968) » Definitions » ROIC %

Comparable Companies

Traded in Other Exchanges

N/A

Address

No. 3, No. 1, Hirano-cho, Chuo-ku, Osaka, JPN, 541-0046

Website

http://www.arakawachem.co.jp

Arakawa Chemical Industries Ltd is engaged in the production and sales of paper chemicals, resins for printing inks, resins for adhesives/adhesives, and intermediates for electronic materials. It manufactures various paper chemicals including water-repellents, sizing agents, paper surface improving agents, and paper strengthening, and other types of papers. It also provides printing inks for offset printing; book (magazine)-gravures and food-package-gravures. It also offers electronic materials, including rosins for use as raw material of chemicals and electronic components.

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