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How do I Search for Return on invested Capital ?
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TOPIC: How do I Search for Return on invested Capital ?

How do I Search for Return on invested Capital ? 5 years, 6 months ago #291

  • Hansas55
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Hi and thanks for taking your time.

I would like to search for the most recent Return on invested capital, but I was not able to perfectly create a free form condition allowing me to do this.

I deeply appreciate your help,

Hansas
Frank

Re: How do I Search for Return on invested Capital ? 5 years, 6 months ago #293

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Hansas,

As a starting point, you may want to try the Free Form Column (or add a right hand side to the equation to make it a condition):

( Net Income(I) + Net Income(I-1) + Net Income(I-2) + Net Income(I-3) + Dividends Paid(I) + Dividends Paid(I-1) + Dividends Paid(I-2) + Dividends Paid(I-3) ) / ( Total Current Assets(I) - Total Current Liabilities(I) - Cash and Equivalents(I) + Plant, Property, and Equipment(I) )

That will give you a TTM ROIC value (you add "Dividends Paid" instead of subtracting it, because it is a negative value from the cash flow statement when there are dividends being paid).

You could make this more robust by coding a variable for Short Term Investments that turns NULL values into 0 and then subtracting that from the denominator as well (as most short term investments should not be counted as "invested capital".

Thanks,
Lenny Grover
Founder/CEO
FinToolbox/Screener.co
The following user(s) said Thank You: wwwclaes, Hansas55

Re: How do I Search for Return on invested Capital ? 5 years, 6 months ago #294

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Thanks for your effort, it works perfectly.
I definately wouldnt be able to figure this out by myself this smoothly,
so I´m very grateful.

You have already done me a great great favor, so only if you have some free time and are comfortable
helping me again and for the last time so far, I am also experimenting with an extremely interesting concept by value investor and Columbia Professor Bruce Greenwald regarding the Value of earnings power.

The calculation is beautiful and has great advantages for me, so I have already tried to create an equation. I even got it right for the most part, but there is one big variable that is just too complicated for me at the moment. its Called "Maintenance Capital Expenditure" and the sophisticated way to calculate it is this (I have already condensed and simplified it to hopefully save you some trouble):

1.Calculate the Average Gross Property Plant and Equipment (PPE)/ sales ratio over 7 years
2. Calculate current year’s increase in sales (current year´s sales - Sales of the year before)
3. Multiply PPE/Sales ratio by increase in sales (the result of the subtraction in 2) to arrive to growth capex
4. Maintenance capital expenditure is the capex figure from the cash flow statement less growth
capex calculated above

It would be absolutely incredible if you could help me with this calculation, Lenny,
I would deeply appreciate your help.
If you want to have an example how it is calculated to illustrate the point, this is a good one I found:
www.oldschoolvalue.com/blog/valuation-me...capital-expenditure/

Thanks for your valuable time and attention,
yours Hansas from europe.
Frank

Re: How do I Search for Return on invested Capital ? 5 years, 6 months ago #295

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Hansas,

Unfortunately, we currently only have Net PP&E in the system (not Gross PP&E). Is there a similar formula that can be calculated from Net PP&E rather than Gross PP&E?

Thanks,
Lenny Grover
Founder/CEO
FinToolbox/Screener.co

Re: How do I Search for Return on invested Capital ? 5 years, 6 months ago #296

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Firstly, Im amazed and thankful for your quick and adequate answer,
thank you for your effort, Lenny.

I searched for a while and was able to find an approximate way to calculate it with net PPE:


1. Calculate Revenue Increase : current year´s sales - Sales of the year before
2. Growth CAPEX = (Net PPE/corresponding Revenue of that year) * Revenue Increase from 1.
3a. Maintenance CAPEX = Capital Expenditure - Growth CAPEX
3b. use the average of the 5 years maintenance CAPEX for reliable results
4. Earnings Power Value per Share = (EBIT - Average Maintenance CAPEX) * 1 / 0.09 + Cash – Interest Bearing Debt) / Shares Outstanding


As far as I can see, it is pretty hard to convert this into a free equation, but then again you definately know a lot more about the possibilites and limits of the system than I do.

I hope that you can use the calculation above in any ways because Prof Greenwald is a highly renowned economist and in my view his findinds are extremely helpful for a lot of investors.

Again thanks for your precious time,
Hansas
Frank

Re: How do I Search for Return on invested Capital ? 5 years, 6 months ago #298

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Lenny or Hansas, would it be possible to add TTM ROIC as a shared variable?

From your description it is certainly doable for me to add it myself, but I think it is a vital key ratio that many users could benefit from (I agree that the Short Term Investments adjustment would be beneficial to include then).
Claes
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