Cash return on capital (Cash ROC)
Free cash flow as a percentage of the capital employed in the business.
It is return on invested capital measured in cash rather than accounting profit, which is the harder test.
How it is computed here
Free cash flow / (shareholders equity + total debt - cash) x 100
Measured over the latest complete fiscal year, as filed. Filed under quality. Higher is the stronger reading, other things equal.
No published threshold exists for this figure, so this page prints none. Read it against the company's own history and its peers instead.
When it misleads
- Free cash flow is lumpy, so this is far noisier than return on invested capital.
- Capital employed is at historical cost, which flatters an old asset base.
Not meaningful for banks, insurers: the product prints n/m with the reason rather than a number for them.
Questions
How is cash return on capital calculated?
Free cash flow / (shareholders equity + total debt - cash) x 100. Measured over the latest complete fiscal year, as filed.
What does cash return on capital tell a value investor?
It is return on invested capital measured in cash rather than accounting profit, which is the harder test.
When does cash return on capital mislead?
Free cash flow is lumpy, so this is far noisier than return on invested capital. Capital employed is at historical cost, which flatters an old asset base.