Clifford Capital Partners Fund Investor Class (CLFFX) Return on Invested Capital (ROIC)

Clifford Capital Partners Fund Investor Class

CLFFX (NASDAQ)

(%)

Models
Clifford Capital Partners Fund Investor Class Return on Invested Capital (ROIC)

# Render description block
model.render_description({
    "data": r"""
### Return on Invested Capital (ROIC)

The return on capital or invested capital in a business attempts to measure the return earned on capital invested in an investment.

> Read more on [Aswath Damodaran - Return Measures PDF](https://pages.stern.nyu.edu/~adamodar/pdfiles/papers/returnmeasures.pdf)

### ROIC Formula

`Return on Invested Capital (ROIC)` = `Net Operating Profit After Tax (NOPAT)` / `Invested Capital`

The Net Operating Profit After Tax (NOPAT) is calculated using the reported Earnings Before Interest and Taxes (EBIT) or Operating Income on the income statement adjusted for the tax liability.

`Net Operating Profit After Tax (NOPAT)` = `Operating Income` * (1 - `Income Tax Rate`)

There are two ways to calculate invested capital: One looks at the company's assets, and another looks at its financing from debt and equity. In this model, we are using the financing based approach.

`Invested Capital` = `Total Stockholders Equity` + `Total Debt` - `Cash and Short Term Investments`

We then adjust `Invested Capital` and `Net Operating Profit After Tax (NOPAT)`  for **capitalized R&D expenses**.
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Historical Data
data.compute({
    "user:%incomeTaxRate": """
        income:incomeTaxExpense / income:incomeBeforeTax
    """,
    "user:netOperatingProfitAfterTaxNopat": """
        income:operatingIncome * (1 - user:%incomeTaxRate)
    """,
    "user:investedCapital": """
        balance:totalStockholdersEquity
        + balance:totalDebt
        - balance:cashAndShortTermInvestments
    """,
    "user:%returnOnInvestedCapitalRoic": """
        user:netOperatingProfitAfterTaxNopat / user:investedCapital
    """,
}, forecast=0, timeseries="annual")

model.render_table({
    "timeseries": "annual",
    "data": {
        "user:%incomeTaxRate": "Income Tax Rate",
        "income:operatingIncome": "Operating Income",
        "user:netOperatingProfitAfterTaxNopat": "Net Operating Profit After Tax (NOPAT)",
        "balance:totalStockholdersEquity": "Total Stockholders Equity",
        "balance:totalDebt": "+ Total Debt",
        "balance:cashAndShortTermInvestments": "- Cash and Short Term Investments",
        "user:investedCapital": "= Invested Capital",
        "user:%returnOnInvestedCapitalRoic": "Return on Invested Capital (ROIC)",
    },
    "start": -5,
    "end": 0,
    "properties": {
        "title": "Historical Data",
        "order": "descending",
        "number_format": "M",
        "include_ltm": True,
        "display_averages": False,
        "width": "responsive"
    }
})

# --- R&D Amortization
assumptions.set({
    "timeseries": "annual",
    "data": {
        "#rDAmortizationYears": """
            5
        """,
    },
    "titles": {
        "#rDAmortizationYears": "R&D Amortization Years",
    },
    "properties": {
        "width": "responsive",
        "title": "R&D Amortization",
        "id": "component-10",
        "bindTo": None
    },
    "descriptions": {
        "#rDAmortizationYears": r"""
Represents the assumed useful life (in years) over which R&D spending is capitalized and amortized to form a **“research asset.”**

A longer period increases the capitalized R&D asset (raising invested capital) and typically lowers adjusted ROIC; a shorter period does the opposite.
        """,
    }
})

# --- R&D Amortization Calculations
data.compute({
    "user:#unamortizedRDRatio": """
        (0 > time:index >= -assumption:#rDAmortizationYears) 
        * (assumption:#rDAmortizationYears + time:index + 1) / assumption:#rDAmortizationYears
    """,
    "user:unamortizedRDValue": """
        income:researchAndDevelopmentExpenses * user:#unamortizedRDRatio
    """,
    "user:#rDAmortizationRatio": """
        (0 > 1 + time:index >= - assumption:#rDAmortizationYears) * 1 / assumption:#rDAmortizationYears
    """,
    "user:rDAmortizationThisYear": """
        income:researchAndDevelopmentExpenses * user:#rDAmortizationRatio
    """,
}, forecast=0, timeseries="annual")

model.render_table({
    "timeseries": "annual",
    "data": {
        "income:researchAndDevelopmentExpenses": "Research and Development Expenses",
        "user:#unamortizedRDRatio": "Unamortized R&D Ratio",
        "user:unamortizedRDValue": "Unamortized R&D Value",
        "user:#rDAmortizationRatio": "R&D Amortization Ratio",
        "user:rDAmortizationThisYear": "R&D Amortization This Year",
    },
    "start": data.get("""
        -assumption:#rDAmortizationYears - 1
    """),
    "end": 0,
    "properties": {
        "title": "R&D Amortization Calculations",
        "order": "descending",
        "number_format": "M",
        "include_ltm": False,
        "display_averages": False,
        "width": "responsive"
    }
})

# Render description block
model.render_description({
    "data": r"""
### Capitalizing R&D Expenses

As per prof. Aswath Damodaran's paper:
> "Research expenses, notwithstanding the uncertainty about future benefits, should be capitalized."

Capitalizing R&D expenses treats R&D as an intangible investment. We estimate a “research asset” as the sum of unamortized R&D based on the selected amortization period.

`Value of the Research Asset` = Sum of `Unamortized R&D Value`

We also record annual amortization of that asset.

`Amortization of Research Asset` = Sum of `R&D Amortization This Year`

We then adjust profitability and capital to reflect this treatment:

`ROIC Adjusted for Capitalized R&D` = `Adjusted NOPAT` / `Adjusted Invested Capital`
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Adjusted ROIC Calculation
data.compute_results({
    "amortizationOfResearchAsset": """
         function:sum(start=-assumption:#rDAmortizationYears - 1, end=-1):user:rDAmortizationThisYear
    """,
    "adjustedNopat": """
        user:netOperatingProfitAfterTaxNopat
        + income:researchAndDevelopmentExpenses
        - result:amortizationOfResearchAsset
    """,
    "valueOfTheResearchAsset": """
         function:sum(start=-assumption:#rDAmortizationYears - 1, end=-1):user:unamortizedRDValue 
    """,
    "adjustedStockholdersEquity": """
        balance:totalStockholdersEquity + result:valueOfTheResearchAsset
    """,
    "adjustedInvestedCapital": """
        result:adjustedStockholdersEquity
        + balance:totalDebt
        - balance:cashAndShortTermInvestments
    """,
    "%roicAdjustedForCapitalizedRD": """
        result:adjustedNopat / result:adjustedInvestedCapital
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "user:netOperatingProfitAfterTaxNopat": {
            "label": "Net Operating Profit After Tax (NOPAT)",
            "type": "$"
        },
        "income:researchAndDevelopmentExpenses": {
            "label": "+ Research and Development Expenses",
            "type": "$"
        },
        "result:amortizationOfResearchAsset": {
            "label": "- Amortization of Research Asset",
            "type": "$"
        },
        "result:adjustedNopat": {
            "label": "= Adjusted NOPAT",
            "type": "$"
        },
        "balance:totalStockholdersEquity": {
            "label": "Total Stockholders Equity",
            "type": "$"
        },
        "result:valueOfTheResearchAsset": {
            "label": "+ Value of the Research Asset",
            "type": "$"
        },
        "result:adjustedStockholdersEquity": {
            "label": "= Adjusted Stockholders Equity",
            "type": "$"
        },
        "balance:totalDebt": {
            "label": "+ Total Debt",
            "type": "$"
        },
        "balance:cashAndShortTermInvestments": {
            "label": "- Cash and Short Term Investments",
            "type": "$"
        },
        "result:adjustedInvestedCapital": {
            "label": "= Adjusted Invested Capital",
            "type": "$"
        },
        "result:%roicAdjustedForCapitalizedRD": {
            "label": "ROIC Adjusted for Capitalized R&D",
            "type": "%"
        },
    },
    "properties": {
        "title": "Adjusted ROIC Calculation",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- Return on Invested Capital
model.set_final_value({
    "value": data.get("""
        user:%returnOnInvestedCapitalRoic
    """, timeseries="annual"),
    "units": "%",
    "title": "Return on Invested Capital",
    "properties": {
        "width": "full" 
    }
})

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Return on Invested Capital (ROIC)

The return on capital or invested capital in a business attempts to measure the return earned on capital invested in an investment.

Read more on Aswath Damodaran - Return Measures PDF

ROIC Formula

Return on Invested Capital (ROIC) = Net Operating Profit After Tax (NOPAT) / Invested Capital

The Net Operating Profit After Tax (NOPAT) is calculated using the reported Earnings Before Interest and Taxes (EBIT) or Operating Income on the income statement adjusted for the tax liability.

Net Operating Profit After Tax (NOPAT) = Operating Income * (1 - Income Tax Rate)

There are two ways to calculate invested capital: One looks at the company's assets, and another looks at its financing from debt and equity. In this model, we are using the financing based approach.

Invested Capital = Total Stockholders Equity + Total Debt - Cash and Short Term Investments

We then adjust Invested Capital and Net Operating Profit After Tax (NOPAT) for capitalized R&D expenses.

Return on Invested Capital (ROIC)

ROIC Formula

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)

Market is Open

After-Hours Quote

Market is Open

After-Hours Quote

Clifford Capital Partners Fund Investor Class Return on Invested Capital (ROIC)

Return on Invested Capital (ROIC)

ROIC Formula

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)