---
title: "Definition of ROIC"
url: https://signalscreener.fr/definition/roic/
markdown_url: https://signalscreener.fr/definition/roic.md
description: "ROIC measures how efficiently a company uses investor money (debt and equity) to generate profits."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "ROIC"
  - "Return on Invested Capital"
translations:
  es: https://signalscreener.fr/es/definition/roic.md
  fr: https://signalscreener.fr/fr/definition/roic.md
  pt: https://signalscreener.fr/pt/definition/roic.md
---

# Return on Invested Capital

## What is ROIC?

ROIC measures how efficiently a company uses investor money (debt and equity) to generate profits. It shows the percentage return on all capital invested in the business.

## Think of it like this

You and a friend invest $10,000 in a food truck. If it generates $2,000 profit yearly, your ROIC is 20%. Compare this to a 2% savings account - the food truck is 10x better at generating returns!

## Formula

```
ROIC = NOPAT / Invested Capital
```

- **NOPAT**: Net Operating Profit After Tax
- **Invested Capital**: Total debt + equity - excess cash

## Why it matters

- Shows management's capital allocation skills
- ROIC > WACC means value creation
- Consistent high ROIC indicates competitive advantage
- Better than ROE because includes debt
- Warren Buffett's favorite profitability metric

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| < 5% | Poor | Destroying value |
| 5-10% | Below Average | Not creating much value |
| 10-15% | Average | Meeting expectations |
| 15-20% | Good | Creating solid value |
| > 20% | Excellent | Strong competitive moat |

## Real-world example

Apple ROIC: 30% - exceptional capital efficiency. Utilities: 5-7% - capital intensive, regulated. Amazon: 15% - good for retail. Software companies: 20-40% - asset-light models.

## Things to watch out for

- Capital calculations vary between sources
- Can be manipulated with financial engineering
- Compare within industries for best results

---

This is educational content, not financial advice.

Source: [Definition of ROIC](https://signalscreener.fr/definition/roic/) on Signal Screener. Free to quote and cite with attribution and a link to that URL, which is the canonical one.

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