Invested Capital: Explanation & Examples

We calculate invested capital in two mathematically equivalent ways: financing and operating approach. Figure 1 shows the basic calculations. On page 2, we share the complete calculations for specific companies.

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3Q15 Sector Ratings for ETFs & Mutual Funds


At the beginning of the third quarter of 2015, only the Consumer Staples sector earns an Attractive-or-better rating. Sector ratings are based on the aggregation of our fund ratings for every ETF and mutual fund in each sector.

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Riskiest Stocks in the Dow Jones Industrial Average


The Dow Jones Industrial Average has a deserved reputation of only housing the best-of-the-best blue chip stocks. Only the oldest, largest, and most profitable companies are included in the index, and these companies are, generally, some of the surest investments you can make. However, assuming that simply because a ticker is in the Dow that…

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Give Your Portfolio an Energy Boost Now


The Energy sector ranks seventh out of the 10 sectors this month and receives our Dangerous rating. The Energy sector as a whole greatly underperformed the S&P 500 in 2014, returning -10% to the S&P’s 12%.

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Danger Zone: Value Investors


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Danger Zone 11/4/13: XBRL (eXtensible Business Reporting Language)

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The potential utility of XBRL as a tool for regulators to fight fraud and investors to better analyze companies makes its numerous flaws that much more of a shame. I can only hope that the SEC realizes the value of XBRL and makes a commitment to ensuring the accuracy and validity of XBRL data.

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Reported Net Non-Operating Items – NOPAT Adjustment


Income statement adjustments include financing items like interest expense/income, preferred dividends and minority interest income. These items are related to the financing of a company’s operations, not the operations themselves. We always calculate NOPAT on an unlevered basis.

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Net Deferred Tax Assets and Liabilities – Valuation Adjustment

Deferred Tax Asset

We subtract net deferred tax liabilities (DTLs minus DTAs) from our calculation of shareholder value as they are real future cash obligations that limit the amount of money available for distribution to shareholders.

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Accumulated Goodwill Amortization and Unrecorded Goodwill – NOPAT Adjustment


Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.

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Non-Operating Tax Adjustment – NOPAT Adjustment


Without removing the tax impact of non-operating items, one still gets distorted picture of a company’s operating profitability.

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Change in Total Reserves – NOPAT Adjustment


Reported earnings don’t tell the whole story of a company’s profits. They are based on accounting rules designed for debt investors, not equity investors, and are manipulated by companies to manage earnings. Only economic earnings provide a complete and unadulterated measure of profitability.

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The Truth Behind AAPL’s Numbers


This article provides some empirical evidence behind my putting Apple (AAPL) in the Danger Zone last week because its return on invested capital (ROIC) is outrageously high. That fact underscores why valuing this company or any other with the expectation that such a high ROIC was sustainable would be a mistake.

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Danger Zone 2/11/2013: Energy Sector


Investors who want exposure to this sector should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fees. Get the list of my top 20 Energy stocks to build your own portfolio.

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Best & Worst ETFs & Mutual Funds: Energy Sector

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The Energy sector ranks fifth out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 20 ETFs and 73 mutual funds in the Energy sector as of January 25th, 2013.

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How To Find the Best Style ETFs


Finding the best ETFs is an increasingly difficult task in a world with so many ETFs to choose from.

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How To Avoid The Worst ETFs


The focus of this article is investing risk or the relative investment potential of the ETF. This risk is much more difficult to asses because it requires researching the investment potential of the ETFs holdings.

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Fox Interview: Street Fight and Market Outlook

In my recent interview, Fox Business’ David Asman digs into the details of what makes a good stock in the current market environment.

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Free report for Ask Matt, Exxon Mobil (XOM) – Very Attractive Rating

Exxon was my Stock Pick of the Week last week. Here is an excerpt from my article: “Buying Exxon Mobil (XOM) now is one of the easiest calls in the market these days…”

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Slow & Steady Wins The Race: Buy XOM


Sometimes, picking stocks is easy if you focus on the basic principles of cash flows, valuation and competitive advantage.

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Fox TV Interview: How To Make Money In This Market

Yesterday, on Fox Business’s After The Bell, I shared my market outlook and strategy for making money in the current market. Here is the interview.

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