3-Year Average Return On Invested Capital
Metrics are only as good as the data that drive them. The best fundamental data in the world drives our metrics. Here’s proof from some of the most respected public & private institutions in the world.
Return on invested capital (ROIC) is not only the most intuitive measure of corporate performance, but it is also the best. It measures how much profit a company generates for every dollar invested in the company.
3-year average return on invested capital (seen in Figure 1) provides additional insights into a firm’s track record of prudent capital management. Companies with a high 3-year average ROIC consistently allocate capital to high return investments.
Properly calculating ROIC, the primary driver of stock prices, is key to measuring a firm’s ability to generate returns on the capital invested in its business. Our Robo-Analyst technology allows us to perform the diligence needed to calculate an accurate ROIC and comparable metrics, such as , 3-year average ROIC, ROGIC and GAAP-based ROIC.
Figure 1: How To Calculate 3-Year Average Return on Invested Capital
3-Year Average NOPAT / 3-Year Average Invested Capital
where
3-Year Average NOPAT = Average NOPAT over trailing three years
3-Year Average Invested Capital= Average of the average invested capital over trailing three years
Sources: New Constructs, LLC
We make it easy for clients to leverage the benefits of a high quality ROIC model and see a clear picture of a firm’s true profitability.
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