What Are ROIC and WACC? — How to read

ROIC > WACC (green spread) = the firm creates value on each invested dollar. Spread (ROIC − WACC) > +1.5pp = 'creates value'; < −1.5pp = 'destroys value'; in between is a neutral buffer. In the yearly bars green = ROIC above the WACC line that year.

What Are ROIC and WACC? — Watch out for

With invested capital ≤ 0 (cash-rich, low-debt) firms ROIC can look extreme/meaningless. WACC is sensitive to beta/risk-free assumptions; small spreads may be within estimation error.

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What Are ROIC and WACC?

Does the return beat the cost of capital?

6 min read

How to read

ROIC > WACC (green spread) = the firm creates value on each invested dollar.
Spread (ROIC − WACC) > +1.5pp = 'creates value'; < −1.5pp = 'destroys value'; in between is a neutral buffer.
In the yearly bars green = ROIC above the WACC line that year.

Watch out for

With invested capital ≤ 0 (cash-rich, low-debt) firms ROIC can look extreme/meaningless.
WACC is sensitive to beta/risk-free assumptions; small spreads may be within estimation error.

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How to read

Watch out for

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