The extent to which ROIC exceeds WACC provides an extremely powerful tool for choosing investments. The P/E ratio, on the other hand, does not tell investors whether the company is producing value ...

The return on invested capital ratio gives a sense of how well a company ... capital with its weighted average cost of capital (WACC) reveals whether invested capital is being used effectively.

Apple’s ROIC is massive and twice as high as Microsoft’s return ratio. Investors are more than willing to pay up for a company that – exaggerations aside – “creates value out of thin air”.