Return on invested capital (ROIC) is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments. … Comparing a company’s return on invested capital with its weighted average cost of capital (WACC) reveals whether invested capital is being used effectively.

Is ROIC same as WACC?

Return on Invested Capital and WACC If the ROIC is greater than the WACC, then value is being created as the firm invests in profitable projects. Conversely, if the ROIC is lower than the WACC, then value is being destroyed as the firm earns a return on its projects that is lower than the cost of funding the projects.

What is considered to be a good ROIC?

A company is thought to be creating value if its ROIC exceeds 2% and destroying value if it is less than 2%.