ROIC against WACC

What it measures¶

ROIC — return on invested capital — is the after-tax operating return a business earns on the money invested in it. WACC — the weighted average cost of capital — is the yearly return lenders and owners together require for that money: the cost of debt after tax and the return owners require, each weighted by how much of the capital it provides. The spread is ROIC minus WACC, in percentage points.

Why it is on the page¶

A business creates value only when its return beats its cost of capital. A positive spread means each unit reinvested adds value; a negative one means growth makes the owners poorer the faster it goes. The moat panel tracks the spread over the stored years and its direction.

Thresholds, their source and the population they were fitted on¶

• Source: Koller, Goedhart and Wessels, Valuation (McKinsey & Company); the stable band of ±1 point is the product's own.
• Fitted on: no statistical sample — a principle of corporate finance.
• Evidence grade: practitioner convention.

Every year is compared with today's WACC, because historical inputs to the cost of capital are not stored; the panel says so.

A worked example¶

Celestica, as the Fundamentals page showed it on 9 August 2026, with a WACC of 7.91%: the spread went from 2.57 points in fiscal 2022 to 6.89, 12.79 and 28.67 in fiscal 2025 — widening by about 8.4 points a year.

What “No verdict” means here¶

The row carries no verdict of its own; the condition summary's Value creation check is where the comparison is counted, against the sector's cost of capital. The row reads insufficient data when ROIC or the WACC inputs are missing.

What the verdict is and is not¶

The spread describes how far past returns beat one estimate of the cost of capital. High spreads tend to narrow as competitors arrive. It is not a forecast and not an instruction to trade the shares.