GURUFOCUS.COM » STOCK LIST » Energy » Oil & Gas » Strathcona Resources Ltd (TSX:SCR) » Definitions » ROIC %

Strathcona Resources (TSX:SCR) ROIC % : 43.74% (As of Dec. 2023)


View and export this data going back to 2023. Start your Free Trial

What is Strathcona Resources 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 %. Strathcona Resources's annualized return on invested capital (ROIC %) for the quarter that ended in Dec. 2023 was 43.74%.

As of today (2024-05-14), Strathcona Resources's WACC % is 10.70%. Strathcona Resources's ROIC % is 9.46% (calculated using TTM income statement data). Strathcona Resources earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Strathcona Resources ROIC % Historical Data

The historical data trend for Strathcona Resources'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.

* Premium members only.

Strathcona Resources ROIC % Chart

Strathcona Resources Annual Data
Trend Dec22 Dec23
ROIC %
18.02 7.17

Strathcona Resources Quarterly Data
Sep22 Dec22 Sep23 Dec23
ROIC % - 62.50 3.59 43.74

Competitive Comparison of Strathcona Resources's ROIC %

For the Oil & Gas E&P subindustry, Strathcona Resources'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.


Strathcona Resources's ROIC % Distribution in the Oil & Gas Industry

For the Oil & Gas industry and Energy sector, Strathcona Resources's ROIC % distribution charts can be found below:

* The bar in red indicates where Strathcona Resources's ROIC % falls into.



Strathcona Resources ROIC % Calculation

Strathcona Resources's annualized Return on Invested Capital (ROIC %) for the fiscal year that ended in Dec. 2023 is calculated as:

ROIC % (A: Dec. 2023 )
=NOPAT/Average Invested Capital
=Operating Income * ( 1 - Tax Rate % )/( (Invested Capital (A: Dec. 2022 ) + Invested Capital (A: Dec. 2023 ))/ count )
=1000.2 * ( 1 - 29.8% )/( (9264.2 + 10332.5)/ 2 )
=702.1404/9798.35
=7.17 %

where

Strathcona Resources'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 )
=3618.004 * ( 1 - 30.64% )/( (1142.361 + 10332.5)/ 2 )
=2509.4475744/5737.4305
=43.74 %

where

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.


Strathcona Resources  (TSX:SCR) 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, Strathcona Resources's WACC % is 10.70%. Strathcona Resources's ROIC % is 9.46% (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.


Strathcona Resources ROIC % Related Terms

Thank you for viewing the detailed overview of Strathcona Resources's ROIC % provided by GuruFocus.com. Please click on the following links to see related term pages.


Strathcona Resources (TSX:SCR) Business Description

Traded in Other Exchanges
Address
421 7th Avenue South west, 1900, Calgary, AB, CAN, T2P4K9
Strathcona Resources Ltd is an energy company, it is a consolidator and developer of oil and gas assets. The company focuses on thermal oil, enhanced oil recovery, and condensate-rich Montney.

Strathcona Resources (TSX:SCR) Headlines

From GuruFocus