ROIC
AccountingDefinition
Return on Invested Capital. NOPAT (net operating profit after tax) divided by invested capital (debt + equity). The cleanest measure of operating return regardless of capital structure.
Quality investors target ROIC > WACC for at least 10 years (companies with sustainable competitive advantages). Compounds powerfully when reinvested at high rates — see Constellation Software, S&P Global, Visa.
Quality investors target ROIC > WACC for at least 10 years (companies with sustainable competitive advantages). Compounds powerfully when reinvested at high rates — see Constellation Software, S&P Global, Visa.
Formula
ROIC = NOPAT / (Debt + Equity)