§ 01
ROIC = NOPAT / Invested Capital
§ 02
AAPL — ROIC, Operating Margin, Debt/Equity. Open AAPL on the Ledge to see current values.
§ 03
The magic number: if ROIC exceeds the company's cost of capital (WACC), every dollar invested creates more than a dollar of value. If ROIC is below WACC, the company is destroying value.
§ 04
| ROIC vs WACC | Meaning | Stock Implication |
|---|---|---|
| ROIC 20% > WACC 10% | Creates value: earns more than cost of capital | Deserves premium valuation |
| ROIC 8% = WACC 8% | Breaks even on capital | Fair value = book value |
| ROIC 5% < WACC 10% | Destroys value: earns less than capital costs | Stock should trade below book |
§ 05
Check the **ROIC** metric for any ticker. Compare it to the company's WACC if available. Is this business creating or destroying value?
§ 06
§ 07
Company X has ROIC of 8% and WACC of 10%. Management wants to reinvest every dollar back into the business. As a shareholder, what do you prefer?
Five questions · AI feedback
Sit with the ideas.
A company has ROIC of 8% and its WACC is 10%. What does this mean?
Why:
Try this in paper trading
Identify the moat. Then size the position.
Pick a company. Articulate its moat in one sentence: switching costs, network effects, intangibles, cost advantage, or efficient scale. Paper-buy a position size proportional to your confidence in that moat surviving 10 years.
Open paper portfolio →Practice mode — simulated trades, not investment advice.