David Trainer explains why return on invested capital (ROIC) matters and why Wall Street gets it wrong. NOPAT and invested capital are the hardest parts to measure correctly. His firm's approach delivers more accurate ROIC calculations than the standard methods.
Chapters
That actually gets me to a point that I want to touch on real fast in this report, and that is how difficult it is to calculate return on invested capital. And that's why we don't see this very often. It's hard. It's hard to do it right. And most of Wall Street doesn't want you to know That it's hard because guess what? They don't want you to look at it. They don't want you to think about it. They want you to just focus on whatever metric they give you or trust whatever metric they give you because they don't want you to know how much work goes into making sure that the numbers are right. And the 2 numbers that are hardest to get right are NOPAT and invested capital. That Ernst Young paper I mentioned focuses on how we do NOPAT and invested capital better than anybody else. In the world. You hear a lot of our other clients and partners say the same thing. Nobody does that kind of diligence. So when you're looking at return on invested capital trends through the new constructs lens, you're getting the best possible measure.