Equity · Core
Return on Invested Capital
ROIC is after-tax operating profit over invested capital — the unlevered return on the money actually in the business.
Definition
ROIC = NOPAT / invested capital, where invested capital is operating assets minus operating liabilities (or equity + net debt). It strips financing. WACC is the hurdle. ROIC > WACC is the value-creation claim.
Why it matters
Capital allocators care whether incremental projects earn above the cost of capital. ROE can be levered into a fake yes.
Case
A serial acquirer prints rising EPS and falling ROIC as goodwill piles up. The story was growth; the capital was earning less than it used to.
How to read it
Be strict about what sits in invested capital (goodwill, leases, cash). Then look at incremental ROIC, not just the stock average.
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