ROIC Stability
How consistent is the company's return on invested capital?
Definition
ROIC Stability measures the coefficient of variation (CoV) of ROIC over multiple years. A low CoV indicates a durable competitive advantage — the company consistently earns high returns regardless of economic cycles.
Formula
Where
Interpretation
| Range | Assessment |
|---|---|
| < 10% | Highly stable — strong moat signal |
| 10% – 20% | Moderate — some cyclical variation |
| > 20% | Volatile — returns are inconsistent |
Buffett's insight: Companies with stable high ROIC over 10+ years almost always have a durable competitive advantage.
In Finsco
Computed by both audit returns and audit moat commands. Uses CoV (not StdDev) so that the stability threshold is independent of the ROIC level — a company with 30% mean ROIC and 3% StdDev (CoV = 10%) is just as stable as one with 15% mean ROIC and 1.5% StdDev (CoV = 10%).
Related Metrics
- ROIC — the underlying return metric
- Economic Moat — ROIC − WACC
- Coefficient of Variation — the general stability metric
- ROIC Trend R² — quantifies whether the slope is reliable or just noise