Arch Capital Ltd ROIC

What is the ROIC of Arch Capital Ltd?

The ROIC of Arch Capital Group Ltd is 4.34%

What is the definition of ROIC?

Return on invested capital (ROIC) is a financial ratio that measures how efficient a company is at allocating the capital under its control to profitable investments.

= NOPAT / Invested capital = EBIT * (1 - tax rate) / (2-year average liabilities + 2-year average shareholder equity)

Return on invested capital (ROIC) ratio gives investors a sense of how well a company is using money under its control to generate profitable returns.

ROIC can be used as a benchmark to calculate the valuation of companies across industries. A higher ROIC means the company is doing a better job of investing the money from shareholders and bondholders to run the business. A company is creating value if its ROIC exceeds 2%. If its ROIC is under 2%, the company is likely destroying value and has no excess capital to invest in future growth.

You can calculate ROIC with the following formula:

NOPAT = Net operating profit after tax
Invested Capital = Average total liabilities + Average shareholders' equity

The averages of liabilities and shareholders' equity are calculated as geometrical averages of the last two annual values from the company's balance sheet.