I value a business using its Return on Invested Capital (ROIC) [1] because this profitability measure is independent of the business’s capital structure (the proportion of debt and equity). [2] A business’s Return on Equity (ROE) is not. I think the valuation of a business should be independent of its capital structure because the business’s value [...]
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Why I value a business using its ROIC instead of its ROE
Posted in ROIC versus ROE on February 24, 2010 | 2 Comments »
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- Asset Allocation
- Competitive Advantage – 1
- Competitive Advantage – 2
- Competitive Advantage – 3
- Controlling emotions
- Customer Captivity
- Earnings Growth and Profitability
- Economies of Scale
- Falsifying scenario’s
- Group Decision Making
- Ignoring market moves
- My Circle of Competence
- My Discount Rate
- My Quantitative Valuation Model – 1
- My Quantitative Valuation Model – 2
- Normalising Earnings
- ROIC and Competitive Advantage
- ROIC versus ROE
- Talking to Management
- Technology and Competition
- The Basics – Part 1
- The Basics – Part 2
- The Basics – Part 3
- Valuing using scenarios
- When to Sell
- Will the business survive?
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