RONIC — return on new invested capital
What it measures¶
RONIC is the return a company earns on the capital it adds, as opposed to the return on everything it already has (ROIC). The growth panel works it out from the identity growth = reinvestment rate × RONIC: implied RONIC = observed growth ÷ reinvestment rate. It is the return the new capital must have earned to produce the growth the company showed.
Why it is on the page¶
It turns growth into a claim that can be checked: a company that grew fast on little reinvestment implies a very high return on that reinvestment. When the implied figure is far above anything the company earns today, the growth may be a one-off, or paid for some other way. The panel also judges a growth rate a reader types in, by the RONIC it implies.
Thresholds, their source and the population they were fitted on¶
| Reference | Line | Source |
|---|---|---|
| believable | implied RONIC no more than 1.5 times the trailing ROIC | the product's own tolerance, shared with the condition summary |
| value-creating | RONIC above the cost of capital (WACC) | Koller and colleagues, Valuation |
- Fitted on: no statistical sample — an identity with a design tolerance.
- Evidence grade: practitioner convention.
A strained figure is flagged, never blocked: the panel computes anyway and states what the growth implies.
A worked example¶
Celestica, as the Fundamentals page showed it on 9 August 2026: in fiscal 2025, observed growth of 28.46% on a reinvestment rate of 30.59% implied a RONIC of 93.02% — far above its ROIC of 36.59%. In fiscal 2024 it was 45.27%. The question the figure raises: is that repeatable, or the product of one demand cycle?
What “No verdict” means here¶
The row carries no verdict of its own. It reads not applicable when there was no net reinvestment — growth without reinvestment has no implied return — and insufficient data when an input is missing.
What the verdict is and is not¶
The figure is arithmetic on one year's growth and reinvestment. It is not a forecast of future returns and not an instruction to trade the shares. The condition summary's Incremental returns check measures a three-year RONIC directly from the profit added.