Return On Invested Capital (ROIC) Explained Using Tesla, Apple and Microsoft stocks.

Welcome to #individualinvestor! Return on invested capital (ROIC) is one of #CharlieMunger's favorite financial ratios because it is a great indicator of the rate of return that you can expect on your stocks. If you have a company with an ROIC of 20% for 10 years, you can then expect that over the course of those 10 years the average annual return on your stock (i.e. stock price appreciation) will be at least 20%, regardless of the revenue growth percentage.

In this video I will show you how to compute ROIC for #Tesla using Tesla's 10-K form. In addition, we will analyze ROIC for #Apple and #Microsoft over the last 10 years and the correlation with their stock prices.

#stocks
#investing
#warrenbuffet

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How can you discuss ROIC without discussing reinvestment rate and payout ratio ? ROIC only really makes sense if you consider reinvestment rate. Only then the compounding taking place in the company can be evaluated.