A Metric that Should Drive Your Investments in 2023
24,575
Published 2022-12-05
#roic #valueinvesting
0:00 ROIC 101: Two ways to fund a business
0:53 What is ROIC? Why is it important?
5:43 A reasonable ROIC?
8:03 Stock Review: Ford vs Microsoft
9:12 Low ROIC isn’t a dealbreaker
11:00 Focus on high ROIC businesses
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-Video Editing by Justin Nelson-
All Comments (21)
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A blend of videos like these between stock analysis, ratios and metric is what the community like Paul. Great explanation! 🤗
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I like videos where Paul teaches finance!
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Though I don’t agree all that Paul teaches, but huge respect for a lot of integrity that he maintains in YouTube finance.
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This is the kind of content I like! I love learning about investing Terms and how they work.
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Most underestimated stock channel on YouTube. Haters gonna hate. Keep it up fellas.
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I love that you guys are talking about ROIC. The idea behind ROIC is more important than a formula. Basically, "On a percentage basis, what 'CASH CAN' the company produce given all the funds invested from debt and equity holders." The problem is that there is no simple formula for it. It requires extra thinking and extra work to calculate. NOPAT/(Debt+Equity) is a good start but it's not enough. You have to think about the unit economics of the business, you have to think about fixed costs, you have to think about share repurchases, you have to think about cash basis vs GAAP, and you have to think about investments on the P&L. If I told my clients their business's ROIC and I based it on GAAP they would laugh me out of the room. You have to approach it from the business operator's perspective. My examples are BRK.B, AMZN, and CRM. These businesses have much higher ROICs than GAAP methods would lead you to believe. DPZ and MAR are businesses with lower ROICs than GAAP methods would lead you to believe. Just remember what the objective of ROIC is when you look at a business and be cautious of just plugging in a formula.
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Using your method means all stocks with huge ROIC are overvalued. High quality is expensive. Your process does not work and this video actually proves it. All these “undervalued” companies have low ROIC,
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Great video. One of the best you guys ever made. I was disappointed with someone videos you made a while ago. But you have outdone yourselves.
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That stuff is the real deal! Thx
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This is the most underrated video!
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Thank you Paul for this video!! This helps with the course im taking :)
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Like all the videos but this one is probably one of my favorites. Thanks guys keep educating
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This is POWERFUL! Sheeesh. Way to break it down, Paul! No lie, I’ve listened to this video on repeat over 15 times. Thanks for the wisdom, man! 💪🏾💪🏾💪🏾💪🏾
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The way I like to do look at ROIC: (FCF - stock based comp)/(Total Equity + Total Debt) I then try to see what the ROIC for the company looks like in both bull and bear markets to get a good overview of how resillient this business is.
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Great explanation Paul. Love it!
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Super video, well and easy explained!
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Thank you. More videos like this please.
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I had IBM since 2020. 71% increase and over 4% of annual dividends. Exactly as you said, good Sir :) I bought it cheap, and now I am getting the benefits.
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Very insightful.
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Thanks for this video, very informative
