ROIC Calculator — Return on Invested Capital
Calculate Return on Invested Capital (ROIC) from NOPAT and invested capital.
Compare ROIC vs WACC to see if a company creates or destroys shareholder value.
Return on Invested Capital (ROIC)
ROIC measures how efficiently a company uses the capital invested in its business to generate profit. It is one of the most important metrics in fundamental analysis because it tells you whether management is creating or destroying value.
Formula:
ROIC = NOPAT / Invested Capital
NOPAT = EBIT × (1 - Tax Rate)
Invested Capital = Total Assets - Current Liabilities - Excess Cash
What NOPAT and Invested Capital represent:
| Term | Meaning |
|---|---|
| NOPAT | Net Operating Profit After Tax — profit from core operations, excluding interest |
| EBIT | Earnings Before Interest and Taxes |
| Invested Capital | All capital deployed in the business — equity + debt, minus non-operating items |
The critical comparison: ROIC vs WACC
| Result | Meaning |
|---|---|
| ROIC > WACC | Company creates economic value — every dollar invested earns more than it costs |
| ROIC = WACC | Break-even — no value created or destroyed |
| ROIC < WACC | Value destruction — better to return capital to shareholders |
WACC (Weighted Average Cost of Capital) represents what investors expect to earn from providing capital to this company. If ROIC exceeds WACC, the company has a competitive advantage worth paying a premium for.
Why ROIC matters more than ROE: ROE can be inflated by taking on debt (leverage). ROIC strips out the effect of financing and focuses purely on operational efficiency.
Typical ROIC benchmarks:
| Sector | Good ROIC |
|---|---|
| Technology | 20%+ |
| Retail | 10–20% |
| Manufacturing | 8–15% |
| Utilities | 5–10% |
Consistent high ROIC over many years is a hallmark of great businesses (Visa, Microsoft, Coca-Cola).