What is ROIC and why does Warren Buffett care about it?

Updated November 15, 2026 · examples use today’s data

Return on invested capital measures how much after-tax operating profit a company earns on every dollar of debt and equity invested in the business. It is the clearest single number for business quality.

A real example

Apple's average ROIC over the last five years is about 59%, far above the 8–10% most companies need just to cover their cost of capital.

Why it matters

A company that earns a high ROIC and can reinvest at that rate compounds value quickly. One that earns less than its cost of capital destroys value as it grows, however fast revenue rises.

How to read it

Look for ROIC that is high and stable over many years, not one great year. Be careful with companies that carry large amounts of goodwill from acquisitions or very little invested capital; the ratio can look extreme in both directions.

Frequently asked questions

What is a good ROIC?

Consistently above 15% is excellent; below 8% means the company barely earns its cost of capital.

ROIC vs. ROE?

ROE only looks at shareholders’ equity, so debt can inflate it. ROIC includes debt and is harder to flatter.

Tools for this

High ROIC stocks Top 30

Keep learning

What is the P/E ratio and how do you use it?What is earnings per share (EPS)?What does TTM (trailing twelve months) mean?What is an ETF and how is it different from a stock?What is a dividend and what is dividend yield?What is compound interest and why does it matter so much?

Educational content, not investment advice. Figures in the examples come from company filings and market prices and update automatically.