New ratios preview (ROIC, WACC, and more)

marco
Sun, 15 Feb 2026 02:38:53 +0000

Dear All,

Following up on this thread New line items for International Sales, Capital Lease Obligations and Impairments here's a preview of some of the ratios we're testing right now. We should have them deployed next week with all the variations (growth rates, annual, ttm, etc). They can all be built right now but some require long formulas and quickly becomes burdensome and error prone when you try to use them.

Some of the implementation are simplification of what you typically find in literature because, for ranking, it's better to simplify, or it doesn't matter. For example NOPAT has many different versions. Here's one of them:

NOPAT = EBIT × (1−T)

For T you can use the company tax rate, the sector average, the country average, or simply nothing. We are planning to just use EBIT which, according to our research, is more stable and has better IC.

I created a public screen where you can see the formulas for the new ratios using annual data. Please let us know your thought as we are still trying to decide the final algorithms. Specially with WACC, the most difficult by far.

Here is a short description of each and the implementations (using annuals) we chose:

Operating Cash Flow Coverage Ratio

OperCashFlA / (IntExpA + PfdDivA / (1 - TxRate%A / 100))

We might use a fixed 25% tax rate to avoid wild swings with corporate tax rates, or at least bound it. Also IntExp can be zero even with large debt. See WACC at the end.

Gross Cash Flow Debt Ratio

FundsFromOpA / DbtTotA

Return on capital employed

100 * NetIncBXorA / ComEqA

Invested Capital

(AstTotA - CashEquivA) - (LiabCurA - DbtSTA))

Return on Invested Capital (ROIC)

100 * NetIncBXorA / InvCapA

Return on Invested Capital (GP version)

100 * GrossProfitA /InvCapA

Return on Invested Capital (OCF version)

100 * OperCashFlA /InvCapA

WACC

(ComEqA / (ComEqA + DbtTotA)) * (@Rf + Beta1Y * 5) + (DbtTotA/ (ComEqA + DbtTotA)) * 100 * @CostofDebt * 0.75

For MRP (Market Risk Premium) we used 5%
For the Tax adjustment we chose 0.75 (1 - 25%)
For @Rf we use Close(0,##UST3MO)

The trickiest part is the the Cost of Debt which we formulated like this

Eval( IntExpA/DbtTotA < (@Rf+1)/100, (@Rf+1)/100, IntExpA/DbtTotA))

Typically the InterestExpense/Debt gives you the cost of debt, but lots of companies have very low or 0 Interest Expense because they hoard a lot of cash, which pays interest, and results in 0 Interest Expense. See AAPL for example: it has a 112B in debt but Interest Expense is 0. According to our research it's better to use Risk Free rate + a small spread.

Let us know what you think. Thanks.