The ROIC formula
ROIC = NOPAT / Invested Capital
Apple's ROIC, margin, and debt, live
AAPL — ROIC, Operating Margin, Debt/Equity. Open AAPL on the Ledge to see current values.
The value test: ROIC versus cost of capital
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.
ROIC versus WACC: three outcomes
| 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 |
Judge a real company against its cost of capital
Check the ROIC metric for any ticker. Compare it to the company's WACC if available. Is this business creating or destroying value?
ROIC as the test of a durable moat
Should a below-cost-of-capital business reinvest?
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?
Check your understanding
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.