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Return on investment (ROI) & ROIC

Return on investment (ROI) measures the profit generated relative to the capital put in; return on invested capital (ROIC) applies that idea to a whole company’s operating capital.

Return on investment (ROI) is the most general profitability idea: the gain from an investment divided by its cost, as a percentage. Applied to a whole business, the more precise cousin is return on invested capital (ROIC) — operating profit after tax divided by the debt and equity actually invested in operations.

ROIC is prized because it measures how well management turns ALL the capital at its disposal into profit, regardless of how that capital is financed. A company that consistently earns an ROIC above its cost of capital is creating value; one that earns less is destroying it, even if it is growing.

ROIC differs from ROE (which looks only at equity) and ROA (which looks at total assets) — a high ROE built on heavy debt looks less impressive next to a modest ROIC.

stocks-llm computes ROIC from each company’s own latest 10-K: NOPAT (operating income × (1 − that fiscal year’s effective tax rate, income tax expense over pre-tax income, bounded to 0–50%)) divided by invested capital (total debt — long-term debt including its current portion, short-term borrowings and commercial paper, leases excluded — plus stockholders’ equity, minus cash), averaged over the fiscal year’s opening and closing balance sheets. Two numerators, never mixed: operating income when the 10-K tags it; when the 10-K tags no operating income, EBIT = pre-tax income + interest expense of the same fiscal year, and every such row is labelled. A company whose filing does not support it (neither operating income nor interest tagged, a pre-tax loss, negative equity, debt reported only together with finance leases, a bank or insurer) gets no ROIC rather than an estimate. A company whose cash offsets more than 80% of its debt and equity (invested capital under 20% of debt plus equity) gets no ROIC either, because the ratio would divide by a small residual.

Highest return-on-invested-capital (ROIC) companies

NOPAT over invested capital (debt, leases excluded, + equity − cash) from each company’s latest 10-K; the Numerator column says whether a row used operating income or the EBIT substitute (pre-tax income + interest); companies with no figure are left out, never estimated.

CompanyROICNumerator
1H&R Block (HRB)+129.0%EBIT = pre-tax income + interest (no operating income tagged)
2Ubiquiti (UI)+114.2%Operating income
3Micron Technology (MU)+105.8%Operating income
4AppLovin (APP)+102.1%Operating income
5BLUE BIRD CORP (BLBD)+101.8%Operating income

Live from the catalog, last updated 2026-10-20 — delayed data from SEC EDGAR + market data.

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Related terms

  • Earnings per share (EPS) — Earnings per share (EPS) is a company’s net profit divided by its shares outstanding — the profit attributable to each single share.
  • Earnings surprise and the reaction — An earnings surprise is how far a company’s reported profit landed from the analyst forecast; the reaction is what its share price actually did afterwards — and the two disagree far more often than people expect.
  • Net profit margin — Net profit margin is the share of every revenue dollar a company keeps as bottom-line profit, after all costs, interest, and taxes.
  • Gross margin — Gross margin is the share of revenue left after the direct cost of producing a company’s goods or services.
  • Operating margin — Operating margin is the share of revenue a company keeps as operating profit, after production costs and operating expenses but before interest and taxes.

See more terms in the stocks-llm glossary.

Informational only — NOT financial advice. This is an educational definition, not a recommendation to buy or sell anything. Metrics on stocks-llm are delayed data and may be missing or stale. Always verify information independently and consult a qualified financial professional before making any investment decision.