Investors should not rely solely on a single metric, as suggested by social media trends, but rather consider multiple metrics to gauge business performance. It is essential to understand that metrics can be calculated in various ways, influenced by how a business operates and their reporting practices, which may involve multiple adjustments. A critical evaluation of numbers is necessary; not all reported figures can be trusted at face value. Additionally, sector variability means that expectations for metrics such as the return on invested capital must align with industry norms, recognizing that performance benchmarks differ across sectors.
Welcome to DividendTalk, where we dive into the latest news, strategies, and tips for dividend investors. In Episode 201, we're exploring three European companies boasting impressive Return on Invested Capital (ROIC).
News of the week:
- **Nationale-Nederlanden's New Venture**: Dutch insurer Nationale-Nederlanden is set to launch a digital bank next year. Joris from DGI shares his thoughts on this strategic move.
Main Topic:
Warren Buffett once said, "Leaving the question of price aside, the best business to own is one that can employ large amounts of incremental capital over an extended period at very high rates of return." In this episode, we break down what ROIC is, why it's crucial for investors, and how it's calculated. We also compare ROIC with other financial metrics like ROI and ROCE, and discuss the significance of comparing ROIC with a company's Weighted Average Cost of Capital (WACC).
We then discuss 3 European examples after the theoretical introduction.
Last but not least, we also discuss several of our listeners questions.
Tune in for insightful discussions and expert analysis on these topics and more in Episode 201 of DividendTalk!