As tireless advocates for the importance of Return on Invested Capital (ROIC), we’ve been encouraged to see a growing appreciation for the metric. Unfortunately, many investors may be relying on flawed calculations of ROIC.
The big banks still have significant advantages. Their brand names, financial capital, advisor networks, and large client bases give them the opportunity to leverage the innovations of startups and become the biggest winners in this new wealth management model.
Norway’s Sovereign Wealth Fund announced that it is looking to restructure compensations plans at certain companies in its portfolio. As the fund looks for a company it can target, we offer a candidate: Lions Gate Entertainment (LGF).
Based on the linear equation within, the stock is worth ~$18/share if we assume that GE can maintain its current ROIC of 3% and not accelerate growth. That downside translates into a loss of $125 billion in market cap or $13 per share (43%) for investors.
In case you missed it, or in case you wanted to watch it again, here is our live webinar from this week. In this webinar, David Trainer, a Wall Street veteran, will discuss how undervalued American Express (AXP) is.
Thesis: Management can boost the market value of American Express in the amounts below by aligning the firm’s strategy and performance compensation with real cash flows or what we call return on invested capital (ROIC).
In this webinar, David Trainer, a Wall Street veteran, will discuss ROIC’s role in the capital markets, how to calculate it correctly, and how to get the most out of the metric
In case you missed it, or in case you wanted to watch it again, here is our live webinar from this week. David Trainer will discuss how undervalued Oracle is relative to real cash flows and ROIC and more.
Thesis: Management can boost the market value of ORCL in the amounts provided by aligning the firm’s strategy and performance compensation with real cash flows or what we call return on invested capital.
It’s incredible that corporate executives and the market as a whole continue to depend on such flawed numbers when we already have a measure that is clearly linked with value creation: return on invested capital (ROIC).
Why do investors, executives, and the financial media focus on reported earnings and other metrics such as EBITDA that ignore the balance sheet? Why aren’t executives around the world adopting ROIC in order to boost returns?