Lilguy

Why Return on Capital Is So Important to Investors

Thanks for the explanation and comparison of the various ways to analyze ROC. It is an important tool in valuing an investment opportunity, despite its limitations.

Besides looking at a firm, however, I think its also important to look at the potential of the industry or sector (sometimes multiple) in which it operates. A lot of growth will come from industry/sector growth no matter which company is selected. So looking at both the industry/sector's prospects as well as the company's performance viz-a-viz that industry/sector is important.

In short, even a buggy whip company with high ROC and yield is not probably going to do well in the future. Maybe a biotech is a better alternative.