Return on Incremental Invested Capital ROIIC
The after-tax return a company earns specifically on the NEW capital it deploys, not on its whole capital base.
What it is
Return on Incremental Invested Capital (ROIIC) measures how profitably a business reinvests fresh dollars. It is the change in NOPAT (net operating profit after tax) over a period divided by the change in invested capital over a (usually slightly earlier) period. Where ROIC grades the entire existing capital base, ROIIC isolates the marginal return on the latest capital put to work.
Why it matters
ROIIC is the truest gauge of a compounding machine: a firm that reinvests at high incremental returns grows intrinsic value fast, since value roughly compounds at ROIIC times the reinvestment rate. The pitfall is that single-year ROIIC is wildly erratic, lumpy capex, acquisitions, write-offs, or a year where profit dips while capital still rises can produce huge, negative, or meaningless figures. Always read it over a multi-year window (3-5 years), not a single year.
How it's calculated
Take the increase in NOPAT between two periods and divide it by the increase in invested capital, typically measured one step earlier because new investment takes time to generate profit. Invested capital is usually total debt plus equity less excess cash (or net working capital plus net fixed assets). Because annual swings are noisy, practitioners average the inputs over a multi-year span rather than relying on one year.
How Quintarthai uses it
A company's deep-analysis page at /app/ shows the multi-year NOPAT and invested-capital trends you need to gauge reinvestment quality, and the Knowledge Base links ROIIC to ROIC, NOPAT, and invested capital so you can trace the inputs.