Company does not have statutory obligation to disclose maintenance or growth capex. We have to estimate by ourselves. There are different methods of estimating maintenance capex. For simplicity I have used depreciation as maintenance capex. Fixed asset purchase minus maintenance capex becomes growth capex.
Please do not use over the counter numbers such as online site for capital allocation analysis. In my take apart from screening of stocks the numbers are subjective and not reliable due to algorthim build in. I have written about it one of post. I prefer to take number from line item from AR and load to excel for my own analysis.
Question 1
The price increase can be a. speculative b. expectation c. value catch up. Now timing of price and fundamental catch up can drift for years. However if we look at fundamental:
Look at ten year financials, you will find substantial increase in revenue, net income and free cash flow. The effect could be seen on most of profitability ratios like ROE/ROA and cash flow indicators. So yes there has been a fundamental change in positive sense, but not on own strength. So once initial value caught initiative buyers become reluctant to pay additional price. Speculators dropped themselves as well (you can see significant decrease in volume).
So yes, sustainable self sufficiency is debatable here.
Question 2
Yes, it is subjective; still we can triangulate from different sources.
One if capex has been used for business you should be able to see increase in production numbers (consumption). Or even increase in revenue.
Two You can check rise in expenses like maintenance, fuel etc.
I would be hesitant to use below the line numbers like profit etc here as under margin sales may not increase profits despite increase in asset base.
Question No 3
I use cash flow as due to nature of information like investing, operations and finance. However this is not the only way.Now lets look at this, a free cash flow generated by company can be used for
- by paying dividend (financing activities)
- by buying back shares (financing activities)
- by acquisitions (investing activities)
- by reinvesting in business ( a new line of business or invest to existing
business as expansion- Growth capex) - by retiring debts (financing activities)
The best way I could find them is cash flow statements. Problem with any ratio would be variable inputs. Yes, asset turnover is helpful. ROA I am skeptical as return depends on many other inputs like efficiency of working capital, inventory adjustments etc.
Question No 4
Operating leverage is a significant indicator to ensure a production increase comes without capex. Meaning static fixed expenses distributed to higher units.
Lets triangulate why this situation would happen:
a. use idle production capacity. Meaning installed plant was not fully operational due to demand or other issues.
b. the production value chain is modified to squeeze more out of assets like production input/output process.
c. plant was designed for phase wise productions. This would mean you build a plant keeping an eye to five years/ten years in future. However some portion can be used after moratorium period. Even cost were spent but production was not on.
d. there can be management decision making where growth capex has been outsourced (like enhancements to existing plant) as AMC or other category expenses which are debited to PL. In this case asset won’t increase but expenses will. This would create an impression additional production without capex increase.
Not sure about short cut, all depends how we triangulate a particular case. If you have a case study (company) please put it across. We will give a shot together!