Return on Capital aka Return on Invested Capital (ROC or ROIC) is the Rate of Return a business earns on investor (stockholders or bondholders) money that they are investing.

 

This is a good indication of how good the management team is at turning capital into profits.

 

A higher ROC means there is something special about the business, otherwise it’s competitors would have driven down the ROC to lower levels.

 

A high ROC is a very good indicator that the company has a competitive advantage, AKA a wide Moat.

 

If a business doesn’t have any new or innovative products/services, or anything that stands out from the competition, then they are going to have a lower ROC because a competitor can come in and do the same thing and take its customers away from them.

 

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