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
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.
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'.
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.
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.
New IPO: The onshore and offshore support services provider for the O&G industry, Steel Hawk Bhd aims to list on the Ace Market!
MQ Trader 14594 views | 13 d ago
0:43
M & A Value Partners IPO Equity Fund
MQ Trader 4782 views | 1 mo ago
0:16
MQ Market Updates - 3 September 2024
MQ Trader 120 views | 19 h ago
0:15
MQ Market Updates - 2 September 2024
MQ Trader 99 views | 1 d ago
0:17
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
stockmanmy
6,977 posts
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.