ROIC (Return on Invested Capital)

ROIC measures how efficiently a company turns the money invested in it into profits. Think of it as a report card for management: if you gave a company $100 to work with, ROIC tells you how much profit it actually generated from that $100. You'll see this metric when comparing companies in the same industry—it reveals which ones are genuinely good at making money versus which ones just look big. A company with 15% ROIC is doing better with shareholder money than one with 5% ROIC. It matters because high ROIC often signals a durable competitive advantage, while low ROIC might mean the business is struggling or burning through capital inefficiently.