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Strategies & Market Trends : Value Investing
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To: IndependentValue who wrote (52023)8/7/2013 10:06:01 PM
From: Paul Senior  Read Replies (1) of 78673
 
Return on capital ratio: I find the "step back" approach to be adequate. Not only to compare one company to its peers, but also to itself. I just in a general way look at d/e to make myself aware of how the d/e ratio might be goosing roe.

For me the issue with the other approaches is that they require too much time to calculate-- esp. if I'm searching for potential buys. Generally, if it's a company I like for high roe (and low p/e), it will also have okay returns on other capital ratio metric meaurements. Not always of course. Enough though that I use roe exclusively. If something has high ROIC (and not high roe), I'll find some of those when/if they're mentioned on this, or other value threads. I guess I'd say that unless you maintain a very concentrated portfolio, making what I call the extra effort to determine what is the "truest return on capital", is not necessary.

the search for the truest return on capital figure has become something of an obsession for me
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