Value Investing In Your Car Episode 25: If I Could Only Rely on 3 Investing Metrics Part 2 – ROIC

The Goal of this Podcast is to Help You Achieve This

I’m curious about everything so this leads to a wide range of reading and learning outside of value investing, finance, and investing.

In these Value Investing In Your Car Episodes, we talk about some of these things and much more including…

Mental models
When does value investing work best
Where it works
You get book reviews from everything I learn from
I talk about the most important thing I learned in 2017
How to learn faster
Useless investing metrics
If I could only use 3 investing metrics what would they be
And much more…

If you want to learn from the other episodes in this series, you can watch the entire playlist here.

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Several weeks ago, I finished up a series on the 4 Most Useless Investing Metrics. You can view these posts below.

Here I detailed why P/E is useless
Here I detailed why beta is useless
Here I detailed why 99.9% of the time goodwill is useless
And here I detailed why 99.9% of the time synergy is useless

I then started another series answering a question I got on Quora several years ago – If I Could Only Rely on 3 Investing Metrics What Would They Be?

In the first video in this series, I told you why FCF / Sales would be one I rely on.

Today, we get to metric number Two, Return On Invested Capital or ROIC.

Let’s get to it.

Return On Invested Capital

In the 19-minute video above, I detailed the following reasons why like FCF/Sales; if I could rely only on 3 investing metrics ROIC would be one of them.

Why it’s so useful
How it’s calculated
Why I calculate it this way
What ROIC shows
Why it’s so important
How it can help you evaluate management
How it can show you several different clues to look at in financial statements
Why capital allocation is so important
And more…

What are your thoughts on ROIC? Do you rely on it a lot? If so, how? Let me know in the comments below.

For a great overview of ROIC, including examples from Warren Buffett himself, go to this link from ValueWalk.

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