ROIC Ratio

[bwzheng2010]

Return on Invested Capital (ROIC) Ratio

1. What is the ROIC Ratio?

The Return on Invested Capital (ROIC) measures how efficiently a company generates profits from its invested capital.

Formula:

$$ ROIC = \frac{\text{NOPAT}}{\text{Average Invested Capital}} $$

Where:

• NOPAT = EBIT × (1 − Tax Rate) (Net Operating Profit After Tax)
• Average Invested Capital = (Beginning Invested Capital + Ending Invested Capital) ÷ 2

⚠️ Warning: ROIC % does not apply to banks, because their balance sheet structure is fundamentally different (e.g., interest-bearing assets vs. invested capital).

Why it matters:

• Evaluates how effectively a company allocates capital to generate returns.
• More reliable than ROE or ROA when comparing across capital-intensive industries.
• A higher ROIC indicates stronger capital efficiency.

2. How to Get ROIC Ratio Using defeatbeta-api

import defeatbeta_api
from defeatbeta_api.data.ticker import Ticker

# Create a Ticker instance
ticker = Ticker("TSLA")

# Fetch quarterly ROIC ratio
df = ticker.roic()
print(df.head())

Sample Output:

report_date	ebit	tax_rate_for_calcs	nopat	beginning_invested_capital	ending_invested_capital	avg_invested_capital	roic
2022-09-30	NaN	NaN	NaN	3.952800e+10	NaN	NaN	NaN
2023-09-30	2.083000e+09	0.08	1.916360e+09	5.264900e+10	5.717000e+10	5.490950e+10	0.0349
2023-12-31	2.252000e+09	0.21	1.779080e+09	5.717000e+10	6.729100e+10	6.223050e+10	0.0286
2024-03-31	1.964000e+09	0.26	1.453360e+09	6.729100e+10	6.925200e+10	6.827150e+10	0.0213
2024-06-30	1.873000e+09	0.21	1.479670e+09	6.925200e+10	7.383000e+10	7.154100e+10	0.0207
2024-09-30	2.876000e+09	0.22	2.243280e+09	7.383000e+10	7.732100e+10	7.557550e+10	0.0297
2024-12-31	2.862000e+09	0.16	2.404080e+09	7.732100e+10	8.079100e+10	7.905600e+10	0.0304
2025-03-31	6.800000e+08	0.29	4.828000e+08	8.079100e+10	8.189700e+10	8.134400e+10	0.0059
2025-06-30	1.635000e+09	0.23	1.258950e+09	8.189700e+10	8.427000e+10	8.308350e+10	0.0152

3. How defeatbeta-api Implements the ROIC Ratio

The roic() method follows these steps:

1. Extract Financial Data

   • ebit (Earnings Before Interest and Taxes)
   • tax_rate_for_calcs (effective tax rate)
   • invested_capital (from balance sheet)

2. Calculate NOPAT

$$ NOPAT = EBIT \times (1 - Tax Rate) $$

3. Align Quarterly Reports

   • Exclude TTM rows
   • Use quarterly data only
   • Ensure continuous quarterly sequence

4. Compute Beginning & Ending Invested Capital

   • Use SQL LAG() to capture prior quarter invested capital as the beginning value

5. Calculate Average Invested Capital

$$ \text{Average Invested Capital} = \frac{\text{Beginning} + \text{Ending}}{2} $$

6. Compute ROIC

$$ ROIC = \frac{NOPAT}{\text{Average Invested Capital}} $$

The calculation is performed via DuckDB SQL queries, and the results are returned as a Pandas DataFrame for further analysis.