ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Sun Life Financial's annualized return on invested capital (ROIC %) for the quarter that ended in Sep. 2024 was 1.85%.
As of today (2024-12-14), Sun Life Financial's WACC % is 8.48%. Sun Life Financial's ROIC % is 1.37% (calculated using TTM income statement data).
Sun Life Financial earns returns that do not match up to its cost of capital. It will destroy value as it grows.
Sun Life Financial ROIC % Historical Data
The historical data trend for Sun Life Financial'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.
Competitive Comparison of Sun Life Financial's ROIC %
For the Insurance - Diversified subindustry, Sun Life Financial'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.
Sun Life Financial's ROIC % Distribution in the Insurance Industry
For the Insurance industry and Financial Services sector, Sun Life Financial's ROIC % distribution charts can be found below:
* The bar in red indicates where Sun Life Financial's ROIC % falls into.
Sun Life Financial ROIC % Calculation
Sun Life Financial's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:
Note:
The EBIT data used here is four times the quarterly (Sep. 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.
Sun Life Financial (TSX:SLF.PR.G.PFD) 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, Sun Life Financial's WACC % is 8.48%. Sun Life Financial's ROIC % is 1.37% (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.
Sun Life Financial ROIC % Related Terms
Thank you for viewing the detailed overview of Sun Life Financial's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.
Sun Life provides life insurance, retirement, and asset management products to individuals and corporate customers in Canada, the United States, and Asia. The company's investment management business contributes approximately 30% of its adjusted earnings and has around CAD 1 trillion in assets under management as of the fourth quarter of 2023. The Canada business contributes about 35% of adjusted earnings and provides individual life and health insurance, group insurance, retirement services, and wealth management solutions. The U.S. business contributed approximately 22% of earnings and is mainly focused on providing group insurance products and managing the in-force life insurance policies. Finally, the Asia segment contributes around 13% of earnings.
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