How to identify companies that make lots of money for shareholders
Economic performance focuses on effective use of the capital invested in the company
weighted average cost of capital
The awkward link between Buffett’s moats and ROIC – Part ll
A company that spends a lot of R&D dollars on intangibles of lasting value will have assets not shown on the balance sheet and ROIC will be artificially inflated. Such a company that is also acquisitive will show depressed ROIC because NOPAT will be reduces because the investments in intangibles of lasting value will be expensed and depress earnings and hence NOPAT.
Moats, ROIC and the problematic Cost of Equity
If the CAPM is flawed, what can replace it? The best approach would be to assess whether companies in general and relatively speaking, the company in question, can raise money cheaply in public offerings.
Problems with the most popular indicator of superb companies
From its growing operating cash flow, it is able to fund growing capital spending and also fund growing R&D expenditures. Of note, it seems to be able to maintain and even improve its operating margins. It is easily able to fund the capex needed to maintain it long-term competitive position in its various markets. It is also easily able to fund the capex it chooses to make to grow the company and fund healthy R&D expenditures.
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