Gentherm Incorporated (NASDAQ:THRM) is a global developer and marketer of innovative thermal management technologies. The company specializes in climate control systems for vehicles, including heated and cooled seats, steering wheels, and other automotive components.
Gentherm competes with companies like Dorman Products, Inc. (DORM) and Motorcar Parts of America, Inc. (MPAA) in the automotive parts industry. In evaluating Gentherm’s financial performance, the Return on Invested Capital (ROIC) is a key metric. Gentherm’s ROIC is 8.36%, which is lower than its Weighted Average Cost of Capital (WACC) of 11.38%. This results in a ROIC to WACC ratio of 0.73, indicating that the company is not generating returns that exceed its cost of capital. This suggests inefficiency in utilizing its capital to generate shareholder value.
Comparatively, Dorman Products, Inc. (DORM) shows a more favorable financial position with a ROIC of 11.88% and a WACC of 7.62%. This results in a ROIC to WACC ratio of 1.56, indicating that DORM is generating returns well above its cost of capital. This efficiency in capital utilization positions DORM as a stronger performer in the industry.
Motorcar Parts of America, Inc. (MPAA) presents a different scenario with a ROIC of 6.23% and a WACC of 15.93%. The ROIC to WACC ratio of 0.39 suggests that MPAA is struggling to cover its cost of capital, similar to Gentherm. This highlights the challenges faced by some companies in the automotive parts sector in generating sufficient returns.
ExlService Holdings, Inc. (EXLS) stands out with a ROIC of 14.80% and a WACC of 9.26%, resulting in a ROIC to WACC ratio of 1.60. This indicates that EXLS is effectively utilizing its invested capital to generate value for its shareholders, outperforming its peers in terms of capital efficiency.