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Return on invested capital, or ROIC, measures after-tax operating profit relative to the capital invested in the business.
Return on invested capital, or ROIC, measures how efficiently a company converts invested capital into after-tax operating profit. It is useful for judging whether growth creates value above the cost of capital.
A common formula is:
ROIC = NOPAT / Invested capital
ROIC is strongest when compared with WACC. A business that earns ROIC above its cost of capital creates value; one below WACC destroys value. Use it with WACC by industry.
Related calculator: ROIC Calculator.