- Morgan Stanley distinguishes star stocks from excellent companies
- Decompressing return on invested capital (ROIC)
Great companies know how to spend money to make money. That’s how Michael Mauboussin, head of consilient research at Counterpoint Global at Morgan Stanley Investment Management, characterises return on invested capital (ROIC) in the June 2023 edition of Morgan Stanley’s Counterpoint Global Insights. It’s a metric that investors should care about.
Gauging how well management is putting your company’s financial clout to use, the equation denominator is the accumulation of invested capital, shareholder equity and debt. The numerator is net operating profit after taxes; how much money the business makes to pay its creditors, and after that to fund future expansion and rewards to shareholders.