Return on Invested Capital
ROIC is after-tax operating profit over invested capital — the unlevered return on the money actually in the business.
Definition
Return on Invested Capital refers to tax operating profit over invested capital — the unlevered return on the money actually in the business. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Equity risk premia compress or expand with earnings paths and factor regimes. When tax operating profit over invested capital — the unlevered return on the money actually in the business shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what return on invested capital is saying. If tax operating profit over invested capital — the unlevered return on the money actually in the business moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
Separate index beta from residual; know the sector and factor loadings of the claim. Prefer a short written null hypothesis for Return on Invested Capital: what would falsify the current reading in the next window?