Calculate ROIC, economic profit, and value spread. Includes DuPont decomposition, NOPAT sensitivity analysis, and WACC comparison for value creation assessment.
Return on Invested Capital (ROIC) answers the most important question in investing: is the company generating returns above its cost of capital? A company earning 20% ROIC with a 10% WACC creates $0.10 of value for every dollar invested. One earning 8% ROIC with 10% WACC destroys value with every dollar deployed.
ROIC is calculated as NOPAT (Net Operating Profit After Tax) divided by invested capital (equity plus debt minus cash). Unlike ROE, which is distorted by leverage, ROIC shows the true operational return regardless of how the business is financed. Warren Buffett, Joel Greenblatt, and Michael Mauboussin all consider ROIC the single most important quality metric.
This calculator computes ROIC, economic profit (the dollar value created or destroyed), and the value spread (ROIC minus WACC). The DuPont decomposition reveals whether returns come from high margins or efficient capital deployment. Sensitivity tables show how changes in NOPAT or WACC estimates affect the value creation verdict.
Use this when you need to test whether a business is compounding capital efficiently. Comparing ROIC with WACC shows whether the company is creating value from each dollar it invests.
ROIC = NOPAT / Invested Capital × 100 Invested Capital = Total Equity + Total Debt − Cash Value Spread = ROIC − WACC Economic Profit = NOPAT − (WACC × Invested Capital) DuPont: ROIC = NOPAT Margin × Capital Turnover
Result: ROIC: 30%, Value Spread: +20pp, Economic Profit: $8M
$12M NOPAT on $40M invested capital = 30% ROIC. With 10% WACC, the value spread is +20pp. Economic profit = $12M − (10% × $40M) = $8M of genuine value creation.
ROIC is most meaningful when you compare it with the business's cost of capital. A spread above WACC suggests value creation; a spread below it suggests the opposite.
Use the DuPont breakdown to see whether returns come from margins, turnover, or both before deciding how durable the result is.
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This worksheet calculates ROIC from the entered NOPAT and invested-capital figure, then compares that return with the entered WACC to produce a value spread and an economic-profit estimate of `NOPAT - (WACC x invested capital)`. It also shows a DuPont-style decomposition using NOPAT margin and capital turnover, and runs simple sensitivity tables by scaling NOPAT or changing WACC while holding the rest of the capital base constant.
Invested capital on the page follows the common simplified formula `equity + debt - cash`, but real-world ROIC definitions vary. The result is therefore an analysis worksheet, not a standardized accounting metric, and any threshold language on the page should be read as context rather than an official cut-off.
Above 15% is generally good; above 20% is excellent. But the key comparison is ROIC vs WACC. A 12% ROIC with 8% WACC creates more value than 18% ROIC with 16% WACC.
NOPAT = EBIT × (1 − tax rate). Some analysts also add back amortization of intangibles or adjust for operating leases.
Also called EVA (Economic Value Added). It's the dollar amount of value created: NOPAT minus the capital charge (WACC × invested capital). Positive = value creation.
Cash earns near the risk-free rate and isn't "invested" in operations. Including it would deflate ROIC, making the company look like a worse operator than it is.
ROIC uses after-tax earnings and a cleaner invested capital definition. It's preferred for comparing companies across different tax jurisdictions and capital structures.
Yes — companies with strong competitive moats (brands, network effects, patents, switching costs) can maintain 25%+ ROIC for decades. Examples: Visa, Moody's, MSCI.