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ROIC (Return on Invested Capital) Calculator
Calculate ROIC, economic profit, and value spread. Includes DuPont decomposition, NOPAT sensitivity analysis, and WACC comparison for value creation assessment.
Net Operating Profit After Tax
Equity + Debt − Cash (or manually entered)
Weighted average cost of capital
For DuPont decomposition
ROIC⧉
30.00%
✅ Value creating (ROIC > WACC)
Value Spread⧉
20.00pp
ROIC 30.0% − WACC 10%
Economic Profit⧉
$8,000,000.00
NOPAT − (WACC × Invested Capital)
NOPAT Margin⧉
15.0%
After-tax operating profitability
Capital Turnover⧉
2.00×
Revenue / Invested Capital
Calc. Invested Capital⧉
$40,000,000.00
Equity + Debt − Cash
Value Creation Gauge
WACC (10%)
ROIC (30.0%)
DuPont: ROIC = Margin × Turnover
NOPAT Margin
15.0%
Capital Turnover
2.00×
NOPAT Sensitivity
| Change | NOPAT | ROIC | Economic Profit |
|---|---|---|---|
| -30% | $8,400,000.00 | 21.00% | $4,400,000.00 |
| -20% | $9,600,000.00 | 24.00% | $5,600,000.00 |
| -10% | $10,800,000.00 | 27.00% | $6,800,000.00 |
| 0% | $12,000,000.00 | 30.00% | $8,000,000.00 |
| +10% | $13,200,000.00 | 33.00% | $9,200,000.00 |
| +20% | $14,400,000.00 | 36.00% | $10,400,000.00 |
| +30% | $15,600,000.00 | 39.00% | $11,600,000.00 |
WACC Sensitivity
| WACC | Spread (pp) | Economic Profit | Verdict |
|---|---|---|---|
| 6% | +24.0 | $9,600,000.00 | Value ↑ |
| 7% | +23.0 | $9,200,000.00 | Value ↑ |
| 8% | +22.0 | $8,800,000.00 | Value ↑ |
| 9% | +21.0 | $8,400,000.00 | Value ↑ |
| 10% | +20.0 | $8,000,000.00 | Value ↑ |
| 11% | +19.0 | $7,600,000.00 | Value ↑ |
| 12% | +18.0 | $7,200,000.00 | Value ↑ |
| 14% | +16.0 | $6,400,000.00 | Value ↑ |
Planning notes, formulas, and examples
About the ROIC (Return on Invested Capital) Calculator
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.
When This Page Helps
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.
How to Use the Inputs
- Enter NOPAT (or calculate it: EBIT × (1 − tax rate)).
- Enter invested capital (or let the calculator derive it from equity + debt − cash).
- Set WACC for the value creation comparison.
- Enter revenue for DuPont decomposition analysis.
- Review ROIC, value spread, and economic profit.
- Use sensitivity tables to test different NOPAT and WACC assumptions.
Formula used
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 TurnoverExample Calculation
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.
Tips & Best Practices
- Consistent ROIC above WACC for 5+ years signals a durable competitive advantage (moat).
- Declining ROIC despite growing revenue may indicate the company is investing in lower-quality projects.
- Compare ROIC trends to identify whether management is deploying capital wisely or chasing growth.
- Adjust invested capital for operating leases (now on balance sheet under ASC 842) for consistent comparisons.
- The Greenblatt "Magic Formula" ranks stocks by ROIC and earnings yield — high ROIC is half the formula.
Value Creation View
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.
Decomposition
Use the DuPont breakdown to see whether returns come from margins, turnover, or both before deciding how durable the result is.
Sources & Methodology
Last updated:
Methodology
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.
Sources
- 6.6 Profitability Ratios and the DuPont Method (OpenStax Principles of Finance) — Reference for return decomposition into margin and turnover components in performance analysis.
- 17.3 Calculating the Weighted Average Cost of Capital (OpenStax Principles of Finance) — Reference for the WACC comparison used in the page’s value-spread and economic-profit outputs.
- A Beginner’s Guide to Financial Statements (U.S. Securities and Exchange Commission) — Reference for the equity, debt, cash, revenue, and profit statement components used in the worksheet.
Frequently Asked Questions
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.
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