IFB292: 5 Metrics Every Beginner Investor Should Know
The Investing for Beginners Podcast - Your Path to Financial Freedom
Understanding ROIC and ROE for Company Efficiency and Growth
ROIC and ROE are metrics that measure a company's efficiency and profit generation from its assets. Companies with assets that create buyer profits, like Apple, can experience better growth without constantly investing in more assets. Higher values of ROIC and ROE are generally desirable, as they indicate better company performance compared to others in the same industry. Companies with consistently high ROIC and ROE tend to be better performers in the long run. Visa, for example, benefits from its nature of business, allowing them to have high ROIC without the need for additional reinvestment. Metrics like ROIC and ROE can help investors identify businesses that have structural advantages and the ability to generate free cash flow. It is important for all businesses to invest in their growth, but the efficiency of these investments determines long-term success.
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