Consilient Observer

•

November 09, 2022

ROIC and Intangible Assets

November 09, 2022

ROIC and Intangible Assets

Consilient Observer

ROIC and Intangible Assets

November 09, 2022

A Look at How Adjustments for Intangibles Affect ROIC

We extend the analysis from our recent report, “Return on Invested Capital,” by adjusting ROIC for all companies to reflect intangible investment.
While the median and aggregate ROIC for the adjusted figures is similar to the traditional one, the adjusted figures have much less dispersion.
The main result is that extremely high and low ROICs regress toward the mean.
We believe these adjustments represent a step toward a more accurate view of the magnitude and return on investment.

PDF herunterladen

Das Counterpoint Global Team ist bestrebt, langfristige Investitionen in einzigartige Unternehmen zu tätigen, deren Marktwert aus fundamentalen Gründen deutlich steigen kann. Ihre Portfolios sind in der Regel konzentriert und unterscheiden sich von ihren Benchmarks. Das Team besteht aus 26 Personen, darunter 16 Investment-Profis und zwei Disruptive Change-Forscher. Die Kultur des Teams fördert Zusammenarbeit, Kreativität, eine kontinuierliche Entwicklung und differenziertes Denken.

Subscribe to Counterpoint Global Insights - Consilient Observer

Email Address*

Please enter a valid email address

Please enter the code sent to your email address.

Valid for 10 minutes only

Invalid Otp

Confirm

Resend Code

Email Not Sent

First Name* Please enter your first name

Last Name* Please enter your last name

Land* Please enter your country

Submit

Ähnliche Einblicke

Consilient Observer

ROIC and Intangible Assets

09-Nov-2022

We extend the analysis from our recent report, “Return on Invested Capital,” by adjusting ROIC for all companies to reflect intangible investment. While the median and aggregate ROIC for the adjusted figures is similar to the traditional one, the main result is that extremely high and low ROICs regress toward the mean. We believe these adjustments represent a step toward a more accurate view of the magnitude and return on investment.

Consilient Observer

Good Losses, Bad Losses

20-Jul-2022

Investors must look past simple measures of profits to understand the true ability to create value, especially with the rise of intangibles. Companies with losses but a high return on investment had attractive shareholder returns in recent decades.

Consilient Observer

New Business Boom and Bust

15-Jun-2022

Burgeoning industries often follow the same developmental pattern as a child’s brain, with an overproduction of options followed by a pruning of those that are not useful. This appears wasteful but is in fact an elegant solution. We discuss this pattern for companies, describe why investors should care, and offer some current examples of where this pattern of entry and exit is playing out.

DEFINITIONS
Free cash flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base.

Return On Invested Capital (ROIC) represents the rate of return a company makes on the cash it invests in its business.

IMPORTANT INFORMATION

The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) and its subsidiaries and affiliates (collectively the Firm”), and may not be reflected in all the strategies and products that the Firm offers.

This material is for the benefit of persons whom the Firm reasonably believes it is permitted to communicate to and should not be forwarded to any other person without the consent of the Firm. It is not addressed to any other person and may not be used by them for any purpose whatsoever. It is the responsibility of every person reading this material to fully observe the laws of any relevant country, including obtaining any governmental or other consent which may be required or observing any other formality which needs to be observed in that country.

This material is a general communication, which is not impartial, is for informational and educational purposes only, not a recommendation to purchase or sell specific securities, or to adopt any particular investment strategy. Information does not address financial objectives, situation or specific needs of individual investors.

Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal.

For the complete content and important disclosures, refer to the article pdf.

ROIC and Intangible Assets