Return on Invested Capital (ROIC)

Motley Fool  Jan 21  Comment 
Here's why return on invested capital is one of the best financial ratios for long-term investors.
OilVoice  Nov 25  Comment 
At the Extraordinary General Meeting of 3Legs Resources plc held today Resolutions number 1 and 2 contained in the Notice of Extraordinary General Meeting and put to the meeting were duly approved. A
Forbes  Aug 11  Comment 
Microsoft recently released its 2014 10-K and our analysts found some interesting items digging through the footnotes. MSFT currently earns our neutral rating, but if new CEO Satya Nadella can halt the company’s declining return on invested...
SeekingAlpha  Jun 26  Comment 
ByBrian Grosso: I wrote an article on AutoZone (AZO) a little over a month ago. In my research then, I took a highly skeptical approach and did find some meaningful concerns but was generally quite impressed. I got the strong impression that...  Jun 13  Comment 
Visit at for the full story.


Return on Invested Capital (ROIC) is used to judge how well companies generate earnings from capital invested in their business. It is essentially the return a company earns on each dollar invests in itself. ROIC is defined as Net Operating Profits Less Adjusted Taxes (NOPLAT) divided by the sum of Working Capital and fixed assets. Return on capital invested is a key driver of a business value (the higher it is, the higher the value) as it represents the return a company earns on its projects relative to its cost of capital.

ROIC = NOPLAT ÷ (Working Capital + Fixed Assets)

- Or -

ROIC = (EBIT * (1-T)) ÷ (Working Capital + Fixed Assets)

When a company's return on invested capital is greater than their cost of capital (commonly measured as the weighted average cost of capital, or WACC) they are creating value by investing in their projects. When this is not the case and company's WACC is greater than their ROIC they are said to be destroying value by investing capital in their business.

Please install Flash Player to view this chart.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki