--- title: ROIC (Return on Invested Capital) explained simply description: ROIC explained simply ✅ Definition & meaning ✓ Example from Microsoft ✓ ROIC for value investors ✓ Application in stock analysis ⇒ Learn more now! image: https://blog.stocksguide.com/hubfs/ROIC%20US.jpg --- [![StocksGuideFianl](https://blog.stocksguide.com/hubfs/StocksGuideFianl.svg "StocksGuideFianl")](https://stocksguide.com/en) - [Portfolios](https://stocksguide.com/en/portfolios) - [Screener](https://stocksguide.com/en/screener) - [Charts](https://stocksguide.com/en/charts) - [Alerts](https://stocksguide.com/en/stock-metric-alerts) - Tools - Discover stocks - [Stock Screener](https://stocksguide.com/en/screener) - [Indices](https://stocksguide.com/en/indices) - [Sectors](https://stocksguide.com/en/sectors) - [Dividend-Topscorer](https://stocksguide.com/en/dividends-strategy/topscorer) - [Growth-Topscorer](https://stocksguide.com/en/high-growth-investing/topscorer) - [Levermann-Topscorer](https://stocksguide.com/en/levermann-strategy/topscorer) - Analyze stocks - [Charting](https://stocksguide.com/en/charts) - [Dividend Calender](https://stocksguide.com/en/dividends-calendar) - [Earnings Calender](https://stocksguide.com/en/earnings-calendar) - [Dividends-Strategy](https://stocksguide.com/en/dividends-strategy) - [Growth-Strategy](https://stocksguide.com/en/high-growth-investing/strategy) - [Levermann-Strategy](https://stocksguide.com/en/levermann-strategy) - Monitor stocks - [Dashboard](https://stocksguide.com/en) - [HGI Watchlist](https://stocksguide.com/en/high-growth-investing/high-growth-investing-watchlist) - [Aristocrats](https://stocksguide.com/en/dividend-aristocrats) - [Notifications](https://stocksguide.com/en/users/edit#notifications) - [Hig-Tech-Wikifolio](https://stocksguide.com/en/high-growth-investing/high-tech-stock-picking-wikifolio) - [Elite Dividend Stocks](https://stocksguide.com/en/continuity-toplists/listen) - [Blog](https://blog.stocksguide.com) - [Portfolios](https://stocksguide.com/en/portfolios) - [Screener](https://stocksguide.com/en/screener) - [Charts](https://stocksguide.com/en/charts) - [Alerts](https://stocksguide.com/en/stock-metric-alerts) - Tools - Discover stocks - [Stock Screener](https://stocksguide.com/en/screener) - [Indices](https://stocksguide.com/en/indices) - [Sectors](https://stocksguide.com/en/sectors) - [Dividend-Topscorer](https://stocksguide.com/en/dividends-strategy/topscorer) - [Growth-Topscorer](https://stocksguide.com/en/high-growth-investing/topscorer) - [Levermann-Topscorer](https://stocksguide.com/en/levermann-strategy/topscorer) - Analyze stocks - [Charting](https://stocksguide.com/en/charts) - [Dividend Calender](https://stocksguide.com/en/dividends-calendar) - [Earnings Calender](https://stocksguide.com/en/earnings-calendar) - [Dividends-Strategy](https://stocksguide.com/en/dividends-strategy) - [Growth-Strategy](https://stocksguide.com/en/high-growth-investing/strategy) - [Levermann-Strategy](https://stocksguide.com/en/levermann-strategy) - Monitor stocks - [Dashboard](https://stocksguide.com/en) - [HGI Watchlist](https://stocksguide.com/en/high-growth-investing/high-growth-investing-watchlist) - [Aristocrats](https://stocksguide.com/en/dividend-aristocrats) - [Notifications](https://stocksguide.com/en/users/edit#notifications) - [Hig-Tech-Wikifolio](https://stocksguide.com/en/high-growth-investing/high-tech-stock-picking-wikifolio) - [Elite Dividend Stocks](https://stocksguide.com/en/continuity-toplists/listen) - [Blog](https://blog.stocksguide.com) Search Search - [Contact Us](https://stocksguide.com/en/contacts/new) - [Contact Us](https://stocksguide.com/en/contacts/new) Search Search ![ROIC (Return on Invested Capital) explained simply](https://blog.stocksguide.com/hubfs/ROIC%20US.jpg) Oct 01, 2025 | [Knowledge](https://blog.stocksguide.com/topic/knowledge) # ROIC (Return on Invested Capital) explained simply How efficiently does a company use its invested capital to generate profits? This is precisely what the ROIC (return on invested capital) ratio measures. In this article, you will learn what ROIC is, why it is so important, and how the ratio is calculated using Microsoft as an example. [Tim Wörster](https://blog.stocksguide.com/author/tim-woerster) Share - [mailto:?&subject=ROIC%20(Return%20on%20Invested%20Capital)%20explained%20simply&body=ROIC%20(Return%20on%20Invested%20Capital)%20explained%20simply%0A(https%3A%2F%2Fblog.stocksguide.com%2Froic-return-on-invested-capital-explained-simply)](mailto:?&subject=ROIC%20(Return%20on%20Invested%20Capital)%20explained%20simply&body=ROIC%20(Return%20on%20Invested%20Capital)%20explained%20simply%0A(https%3A%2F%2Fblog.stocksguide.com%2Froic-return-on-invested-capital-explained-simply)) - - - ### **Table of Contents** 1. [What is ROIC?](https://blog.stocksguide.com/roic-return-on-invested-capital-explained-simply#What-ROCE) 2. [Why is ROIC important?](https://blog.stocksguide.com/roic-return-on-invested-capital-explained-simply#How-is-the-enterprise-value-free-cash-flow-ratio) 3. [Example: ROIC of Microsoft?](https://blog.stocksguide.com/roic-return-on-invested-capital-explained-simply#What-does-the-enterprise-value-free-cash-flow) 4. [Why is ROIC important for value investors?](https://blog.stocksguide.com/roic-return-on-invested-capital-explained-simply#why-roce-important-value-investors) 5. [What investors can learn from this](https://blog.stocksguide.com/roic-return-on-invested-capital-explained-simply#What-investors-can-learn) 6. [Conclusion](https://blog.stocksguide.com/roic-return-on-invested-capital-explained-simply#conclusion) ## **What is ROIC? 🤔** ROIC stands for return on invested capital. This key figure shows how efficiently a company uses the capital tied up in its operating business to generate profits—regardless of whether it comes from equity or debt capital. The formula is: *ROIC = NOPAT/Invested capital x 100* - **NOPAT** = Net Operating Profit After Taxes - **Invested capital** = capital employed In contrast to **ROCE**, **ROIC** (return on invested capital) only takes into account **operating capital invested**—i.e., exclusively the capital that is used directly to generate operating profits. This makes ROIC particularly well suited for **assessing the pure efficiency** of the core business—independent of non-operating assets or the company's capital structure. ## **Why is ROIC important? ☝️** ROIC provides investors with a clear answer to the question: **“How well does a company generate profits with the capital invested?”** A high ROIC indicates that a company is using its investments particularly efficiently and achieving above-average returns. A declining ROIC, on the other hand, can be a warning sign—for example, of unfavorable investments or declining profitability in the core business. ## **Example: ROIC of Microsoft 📈** Microsoft is a good example of a company with a high return on capital employed. Its current ROIC is **26%**. ### **Calculation** We calculate the[ROIC of Microsoft](https://stocksguide.com/charts?metrics%5B%5D=roce&stocks%5B%5D=Microsoft-US5949181045&data_format=original&date_range=maxYears) using the familiar formula: *ROIC = NOPAT/Invested capital x 100* **Step 1: Determine NOPAT** According to the current annual report, Microsoft's NOPAT is: *NOPAT = $84 billion* **Step 2: Utilize invested capital** The invested capital amountsis: *Invested capital = $323 billion* **Step 3: Calculate ROIC** *ROIC=NOPAT/Invested capital x 100 = $84 billion/$323 billion = 26%* Microsoft therefore generates around $0.26 in operating profit for every dollar of capital invested—a strong figure that underscores the company's solid return on capital and efficiency.   ## **Why is ROIC important for value investors? 💡** Value investors look for companies that are sustainably profitable and use their invested capital particularly efficiently. This is exactly where ROIC comes in: the key figure not only shows whether a company is making a profit, but also how much return it achieves on every dollar of invested capital. A consistently high ROIC can indicate that a company has a robust business model, strong competitive advantages (moat), and smart management decisions. For value investors, ROIC is therefore a key indicator of true return on capital—and a strong criterion when selecting long-term investments.   ## **What investors can learn from this 🤓** A ROIC of 26% shows that Microsoft uses its invested capital extremely efficiently. Such figures are a strong indication that the company is operating profitably and using its resources extremely effectively. ![](https://blog.stocksguide.com/hs-fs/hubfs/undefined-Oct-13-2025-11-45-29-0428-AM.png?width=1000&height=563&name=undefined-Oct-13-2025-11-45-29-0428-AM.png) However, even a high ROIC should be monitored over time. A decline may indicate investments that are not (yet) paying off—or declining profitability in the core operating business. ## **Conclusion** The ROIC ratio shows at a glance how efficiently a company is working with its invested capital. It is an indispensable tool for investors—especially when comparing capital-intensive business models. ### **👉 How to use ROIC in stock analysis:** ✅ Compare ROIC values over several years. ✅ Look for stable or rising values—an indication of efficient capital utilization. ✅ Use ROIC in industry comparisons: Which companies make the best use of their invested capital?   Tip: In the[StocksGuide charts](https://stocksguide.com/en/charts?metrics%5B%5D=price&data_format=original&date_range=fiveYears), you can compare and visually analyze the ROIC of thousands of companies at a glance. This allows you to quickly identify particularly efficient companies and make more informed decisions on the stock market. With the [StocksGuide screener](https://stocksguide.com/en/screener?metrics=roce_ttm-greater_equal-0%26index-equal-DAX), you can filter the most attractive stocks in just a few clicks—based on ROIC and over 40 other key figures. [Here you will find an overview of DAX companies and their ROIC](https://stocksguide.com/en/screener?metrics=roic_ttm-greater_equal-0%26index-equal-DAX). Take a look now!   ![Tim Wörster](https://blog.stocksguide.com/hs-fs/hubfs/twbild.jpeg?width=70&name=twbild.jpeg) ### Written By: Tim Wörster Tim Wörster is studying business administration with a keen interest in financial markets and company valuation. As a passionate private investor, he is particularly interested in how economic relationships and corporate strategies influence price developments on the markets – and is now contributing this passion to StocksGuide. ## You May Also Like ### [![ROIC (Return on Invested Capital) explained simply](https://blog.stocksguide.com/hubfs/ROCE%20US.png) *Jul 09, 2025 | Knowledge* ROCE (Return on Capital Employed) explained simply](https://blog.stocksguide.com/roce-return-on-capital-employed-explained-simply) ### [![ROIC (Return on Invested Capital) explained simply](https://blog.stocksguide.com/hubfs/Verschuldungsgrad%20%F0%9F%87%BA%F0%9F%87%B8.jpg) *Jun 13, 2022 | Knowledge* Debt Ratio simply explained](https://blog.stocksguide.com/knowledge/debt-ratio-simply-explained) ### [![ROIC (Return on Invested Capital) explained simply](https://blog.stocksguide.com/hubfs/KGV-Alarm%20US.jpg) *Aug 24, 2022 | Knowledge* How to create a P/E ratio alert](https://blog.stocksguide.com/knowledge/how-to-create-a-p/e-ratio-alert) [View more blog posts](https://www.example.com) [![StocksGuideFianl](https://blog.stocksguide.com/hubfs/StocksGuideFianl.svg "StocksGuideFianl")](https://stocksguide.com/en) Binzallee 30, Zürich 8055 © 2024 aktien.guide AG - StocksGuide - [Features](https://stocksguide.com/en/product) - [Plans](https://stocksguide.com/en/premium) - Company - [About](https://stocksguide.com/en/about-us) - [Contact us](https://stocksguide.com/en/contacts/new) - [Privacy Policy](https://stocksguide.com/en/privacy-policy) - [Imprint](https://stocksguide.com/en/imprint) - Discover Stocks - [Blog](https://blog.stocksguide.com) - [Earnings Calendar](https://stocksguide.com/en/earnings-calendar) - [Dividend Calendar](https://stocksguide.com/en/dividends-calendar) - [Stock Screener](https://stocksguide.com/en/screener) - [Elite Dividend Stocks](https://stocksguide.com/en/continuity-toplists/listen) - [Dividend Aristocrats](https://stocksguide.com/en/dividend-aristocrats) - [Stocks](https://stocksguide.com/en/stocks) - [Glossary](https://lp.stocksguide.com/glossary) **Disclaimer** aktien.guide AG assumes no liability for the information presented, its accuracy and completeness. 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