One of the most critical metrics in assessing future investment performance is return on invested capital (ROIC). It helps assess a company’s ability to meet its ultimate goal: taking the money investors provide and turning it into even more money.
High ROICs signal that a company is doing just that. They also have meaningful implications for the future of stock prices. This is because high ROICs indicate that a company has a competitive advantage. If this advantage is sustainable, a company can maintain its high ROIC, which Morgan Stanley (NYSE: MS) researchers link to stock market outperformance over time.
