Posted by stockmanmy > 2016-04-26 12:54 | Report Abuse

Whether it is ROIC and EPs....both come from sales and profits.

get sales and profits wrong, every thing go wrong.

Posted by Icon8888 > 2016-04-26 12:57 | Report Abuse

We should focus on what the market wants, not what we want. Ultimately, the market is the one that determine how much the stocks we hold should be priced. If market likes EPS, focus on EPS. If market likes ROIC, focus on ROIC

Posted by stockmanmy > 2016-04-26 12:59 | Report Abuse

3 kinds of participants
long term guys, portfolio guys.....and the rest of us.

the rest of us...meaning 99% of participants are traders. holding a share for 1 or 2 quarters is still a trader, 1 or 2 years is still a trader.


a long term investor such as a director has his fortunes tied to the company for the long haul that can measure a decade or so.

Posted by stockmanmy > 2016-04-26 13:09 | Report Abuse

to be a super investor, you have to sailang, to go all in , margin, sell house sell underwear, when you have done your home work and a strong opinion.

how many can be a super investor?

Posted by stockmanmy > 2016-04-26 13:24 | Report Abuse

ROIC and all the other 20 formulas are for kiasu investors who will never be super investor
kiasu investors look for 20 formulas to built their moats, these are conservative investors who does have what it takes to be a super investor.

Posted by Ricky Yeo > 2016-04-26 13:36 | Report Abuse

Please continue

Posted by teareader > 2016-04-26 13:43 | Report Abuse

Problem of kiasu investors: Too much analysis = paralysis.

Posted by stockmanmy > 2016-04-26 13:54 | Report Abuse

Soros keep pushing his assistant to increase his bet size after they both agreed the analysis is the correct analysis.

that is how to become a super investor.

if you listen to KYY talk, his formula cannot be simpler.

but how many have what it takes to be a super investor?

Posted by Probability > 2016-04-26 14:01 | Report Abuse

Glad to know you are shifting your focus from ROE Ricky...
the trick to know what matters - is to identify where are the causes and the effects..

ROIC is one step closer to the Cause than the 'apparent effects' we see on ROE simply due to the Financing structure - D/E ratio...

now you should know that you can also start dissecting ROIC = NPM X TAT... TAT = Revenue over Invested Capital

The great thing about ROIC is that it combines the Revenue one may achieve compromising on Margin, while ensuring the bottom line - How much you make per unit time per unit invested capital.... - the true 'efficiency'.

Posted by stockmanmy > 2016-04-26 14:12 | Report Abuse

ratios are for managing a great company.

Du Pont ratio eg , is a great tool .

for investors, they are concerned with strategic issues, with big picture considerations, with the factor X ( the unknown and unknowable factors about the company's future and prospects).............


also helps explain why there is a wide range of PE ratios and ROIC for investors to choose from.

Posted by AlsoBuy > 2016-04-26 14:14 | Report Abuse

Interesting.

Posted by Ricky Yeo > 2016-04-26 14:18 | Report Abuse

Probability I still look at both but yea ROE can be distorted by leverage or large sum of cash for example

Posted by noobnnew > 2016-04-26 14:35 | Report Abuse

If I am not mistaken, some of the main content of this article are from Valuation. A book that every value investor should read.

Posted by stockmanmy > 2016-04-26 15:09 | Report Abuse

ricky....you still have to link ROIC to the price you pay......how do you link these 2 together?

Posted by Probability > 2016-04-26 15:21 | Report Abuse

Not considering debt and Excess Cash available, its simply P/IC...

People talk about P/B ratio being below 1.5 as a quick rule of thumb...however I am more keen to ensure the Price to IC does not exceed a certain value where I would get heavy damage when the ROIC reverts to 'mean', i.e the average Cost of Capital - unless it has Moats. You need to ensure your cash yield (or at the least NOPAT / P)would still be above FD rate when the ROIC becomes say 10%.

For Net Cash company , quick rule would be NOPAT / EV
For Net Debt company , quick rule would be E / P

the above has flaws...as in reality Net Cash are not paid out as Dividends or used for Buya backs...and they are all not considering the growth factor (delta-IC/IC) and the sustainability of ROIC.

Posted by Piggybank > 2016-04-26 17:41 | Report Abuse

Good article, can you come up a suggested co list that follows roic criteria?