ROIC % measures how well a company generates cash flow relative to the capital it has invested in its business. It is also called ROC %. Taylor Morrison Home's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 12.67%.
As of today (2024-04-25), Taylor Morrison Home's WACC % is 10.66%. Taylor Morrison Home's ROIC % is 11.36% (calculated using TTM income statement data).
Taylor Morrison Home generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.
Taylor Morrison Home ROIC % Historical Data
The historical data trend for Taylor Morrison Home'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 Taylor Morrison Home's ROIC %
For the Residential Construction subindustry, Taylor Morrison Home'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.
Taylor Morrison Home's ROIC % Distribution in the Homebuilding & Construction Industry
For the Homebuilding & Construction industry and Consumer Cyclical sector, Taylor Morrison Home's ROIC % distribution charts can be found below:
* The bar in red indicates where Taylor Morrison Home's ROIC % falls into.
Taylor Morrison Home ROIC % Calculation
Taylor Morrison Home's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:
Note:
The Operating Income data used here is four times the quarterly (Dec. 2023) 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.
Taylor Morrison Home (NYSE:TMHC) 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, Taylor Morrison Home's WACC % is 10.66%. Taylor Morrison Home's ROIC % is 11.36% (calculated using TTM income statement data).
Taylor Morrison Home generates higher returns on investment than it costs the company to raise the capital needed for that investment. It 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.
Taylor Morrison Home earns returns that do not match up to its cost of capital. It will destroy value as it grows.
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.
Taylor Morrison Home ROIC % Related Terms
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Taylor Morrison Home (Taylor Morrison Home) Business Description
Taylor Morrison Home is an American residential construction company that builds single-family homes and communities throughout California, Arizona, Texas, Illinois, Colorado, Florida, Georgia, and North Carolina. Taylor Morrison also reports via a mortgage operations segment that provides financing services for its homebuyers. It constructs various types of single-family homes, from entry-level to luxury move-up homes, as well as active adult communities. The majority of the company's revenue is derived from its construction projects, with the West and central operating regions leading the way.
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