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Investing in companies with high ROIC can be a profitable strategy. Here are some strategies: 1. Look for companies with a consistent history of high ROIC. This indicates efficient use of capital. 2. Consider the company's growth prospects. High ROIC is more valuable if the company can reinvest at high rates. 3. Evaluate the company's competitive advantage or 'moat'. Companies with a strong moat can maintain high ROIC for longer. 4. Be mindful of valuation. Even a high ROIC company can be a poor investment if the price is too high.
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Need help with which companies or projects to invest in? As a key driver of value in business, ROIC measures how well the company deploys its capital....
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2020 was a challenging year but it was also a year of learning. New Constructs – a company that provides stock research tools on the market, published an important report that was featured in Forbes. The report analyzes the drivers of economic earnings: ROIC, NOPAT margin, invested capital turns and the weighted average cost of capital (WACC) for the S&P 500 – a stock market index that measures the stock performance of 500 large companies.
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