Larry,

I have a few questions about the example for calculating ROC.

You took the average of the two recent quarters of income instead of using the sum of the four previous quarters. Did you do that because of the disparity? How will the NOVICE analyst know when to do that?

I tried to get the ROC for CWTR.

I used the income for the previous 4 quarters (no averaging).

Income before Taxes $59,554,000
Working Cap $125,820,000
Fixed Assests $140,605,000

This gave me a ROC of 22.4%.

Does that look correct?

And, is that a good number for a retailer?

Thanks,
Steve

Steve,

I looked at the last two quarters for FTO because I thought it was more realistic than looking at the last four quarters due to the surge in crude oil prices over the last year. How would a novice know to do that? You wouldn't. But it doesn't really make much difference how you do it as long as you're comparing apples to apples.

Your numbers for CWTR look about right. I generally look for a ROC of at least 50%, no matter the industry. Or if I was particularly interested in retailers, I would try to find the retailers that had the highest ROC. For example, Deb Shops (DEBS) has a ROC of over 100%. The stock is also up about 42% over the last two months.

Larry