Business quality
ROIC vs. WACC: Did the Business Earn Enough?
Before buying a stock, ask whether the business makes enough profit to justify the money invested in it. Apple passes this test here; Boeing doesn't after we remove a one-time sale gain.
The numbers first
Apple vs. Boeing
Apple's regular business made a profit. Boeing's reported profit depended on a one-time sale; without it, our calculation shows a loss. Apple's shares also beat Boeing's by 152.1 percentage points over five years.1
Apple
Earned moreBusiness return in 2025 (ROIC)
53.0%
Estimated funding cost in Sep. 2026 (WACC)
10.6%
Share-price change over five years
+140.5%
Boeing
Earned lessBusiness return in 2025, excluding a sale gain (ROIC)
−8.2%
Estimated funding cost in Sep. 2026 (WACC)
8.9%
Share-price change over five years
−11.6%
1 Share-price period: Sep. 27, 2021 to Sep. 25, 2026. Apple gained 140.5%; Boeing lost 11.6%. The difference is 152.1 percentage points. The stock lines use adjusted prices; the S&P 500 line includes dividends. See Apple price history and Boeing price history.
Business returns are from FY2025. Funding-cost estimates use Sep. 25, 2026 inputs. These dates differ, and the chart does not show that ROIC caused the stock returns. The Apple and Boeing SEC filings and the calculations below show how we got each business return.
What do the two numbers tell you?
ROIC is what the business earned on its invested money. WACC is our estimate of what that money cost. Compare them to see whether the business cleared the bar. This does not predict the stock price.
| Result | Meaning | Ask next |
|---|---|---|
| Earned more than it cost | The business cleared the bar. | Has it done so for several years? |
| Earned about the same | It roughly broke even on this measure. | Are profits improving? |
| Earned less than it cost | It missed the bar. | Was it one bad year or a lasting problem? |
What did the business earn? (ROIC)
ROIC compares a year's profit from normal operations with the money tied up in the business. Higher means it earned more for each dollar invested.
- After-tax operating profit is profit from the regular business after estimated tax. You may see it called NOPAT.
- Money invested is money tied up in running the business. Analysts may count it differently, especially cash.
- Average uses the beginning and ending amounts, not just one day.
- Use the same method when comparing companies. Accounting for research, software, and brands can make simple comparisons less fair.
Worked example: Apple FY2025
Where Apple's 53.0% ROIC comes from
Each number below comes from Apple's FY2025 annual report filed with the SEC. The dollar amounts are in millions. This is our simple calculation, not a ROIC number that Apple reports.
- Start with profit from operations: $133,050.
- Estimate the tax rate from the filing: income-tax expense ($20,719) ÷ profit before tax ($132,729) = 15.6%.
- Estimate operating profit after tax, or NOPAT: $133,050 × (1 − 15.6%) = $112,281.
- Estimate the money used to run the business in FY2025. From the balance sheet, take total assets ($359,241) and subtract amounts owed to suppliers ($69,860), other short-term bills ($66,387), and customer payments received before service ($9,055). That gives $213,939.
- Apply the same steps to FY2024 to get $209,467. The average of FY2024 and FY2025 is ($209,467 + $213,939) ÷ 2 = $211,703.
- Divide after-tax operating profit by that average: $112,281 ÷ $211,703 = 53.0% ROIC.
Another website may show a different ROIC for Apple. It may leave out cash, treat research spending differently, or use another way to count money invested in the business. The steps above show exactly which definition this page uses.
Worked contrast: Boeing FY2025
Why we take out a one-time gain from selling a business
- Boeing's FY2025 annual report shows $4,281 million of officially reported operating profit. That figure includes a $9,566 million gain from selling Digital Aviation Solutions. The official result is a profit, not a loss.
- To see what remains without that sale, we subtract it: $4,281 million − $9,566 million = −$5,285 million. We do not count an immediate tax saving from this loss. This adjusted number is our calculation, not Boeing's reported profit.
- We estimate FY2025 money invested in the business as total assets ($168,235 million) minus supplier bills ($13,109 million), other unpaid bills ($27,141 million), and customer advances ($59,404 million). That leaves $68,581 million. FY2024 gives $60,563 million using the same steps, so the two-year average is $64,572 million.
- Our adjusted ROIC is −$5,285 million ÷ $64,572 million = −8.2%. The result could change if we treated Boeing's acquisitions, business sale, customer advances, or taxes differently. Boeing does not publish this adjusted ROIC.
What did that money cost? (WACC)
A company uses money from shareholders and lenders. Both expect a return. WACC is our estimate of that combined cost. It is not a number the company reports or a bill it pays.
WACC = (E/V) × Ke + (D/V) × Kd × (1 − T) + (P/V) × Kp
V = E + D + P
Ke = risk-free rate + beta × equity-risk premium
What the letters mean, in formula order
- E is what all of the company's ordinary shares are worth at the chosen market price. Multiply share price by the number of shares.
- V is the total value of the money supplied by ordinary shareholders, lenders, and preferred shareholders: E + D + P.
- Ke is the return ordinary shareholders are estimated to require. We start with a U.S. Treasury rate, then add extra return for stock-market risk.
- D is what the company's borrowings are estimated to be worth today.
- Kd is an estimate of what borrowing would cost now. It is not last year's interest bill divided by debt.
- T is the assumed tax saving from deducting interest. A company may not be able to use that saving right away.
- P is what preferred shares are worth. Apple has no preferred-stock term in this example; Boeing does.
- Kp is the return preferred shareholders are estimated to require. We do not need it for Apple because P is zero.
WACC does not appear as a ready-made number in an SEC filing. We estimate it. One outside input, called beta, helps estimate how risky the shares are compared with the market. The amount borrowed, the estimated borrowing rate, and the assumed tax saving are specific to each company.
Worked example: Apple WACC as of Sep. 25, 2026
How we estimate Apple's 10.6% WACC
Apple's latest available SEC quarterly report gives us its share count and borrowings. Share prices, Treasury rates, and estimates of stock and borrowing risk come from the dated links in the table. Apple did not report those outside estimates to the SEC. Dollar amounts are in billions unless we say "per share." We show percentages to one decimal place but calculate with the more precise source numbers.
| Part of the formula | Apple | Where the number comes from |
|---|---|---|
| Value of ordinary shares (E) | $4977.6B | $341.07 closing share price on Sep. 25 × 14,594.2 million shares reported as of Jul. 17 |
| Total money from investors and lenders (V) | $5050.8B | Add E + D + P: $4977.6B of ordinary shares + $73.2B of debt from Note 6 + our $0.0B preferred-share assumption based on the balance sheet |
| Estimated cost of ordinary shares (Ke) | 10.7% | Start with the Sep. 25 10-year U.S. Treasury rate of 5.2%. Add beta × the 4.1% extra return investors were estimated to require for stock-market risk on Sep. 1. For beta, start with a 1.31 estimate for similar companies and adjust for Apple's debt: 1.31 × [1 + (1 − 21.0%) × D/E] = 1.325. The peer group is only an approximation. |
| Borrowings (D) | $73.2B | Apple's Jun. 27 SEC filing estimates its longer-term notes at $71.2B and reports $2.0B of short-term commercial paper. |
| Estimated borrowing cost (Kd) | 5.7% | Sep. 25 yield for AA-rated corporate bonds. This is a stand-in for Apple's current borrowing cost, not an observed rate on every Apple bond. |
| Assumed tax saving on interest (T) | 21.0% | We use the U.S. statutory tax rate stated in Apple's FY2025 SEC filing as an assumption. |
| Preferred shares (P) | $0.0B | Apple's Jun. 27 balance sheet lists ordinary shares but no preferred-share line. $0.0B is our assumption, not a separately reported figure. |
| Cost of preferred shares (Kp) | Not needed | Because we set P to $0.0B based on the same balance sheet, no preferred-share cost enters Apple's calculation. |
Step 1. Add the funding sources: V = E + D + P = $5050.8B
Step 2. Find each source's share of the total: E/V = 98.6%; D/V = 1.4%; P/V = 0.0%
Step 3. Weight and add the costs: WACC = 98.6% × 10.7% + 1.4% × 5.7% × (1 − 21.0%) = 10.6%
These are estimates, not exact prices for all of Apple's funding. The AA bond yield stands in for Apple's own borrowing rate. The 21.0% tax assumption differs from the 15.6% rate calculated from Apple's FY2025 income-tax expense and profit before tax. A better estimate could use the yield on an Apple bond and an updated forecast of its tax rate.
Same method: Boeing WACC as of Sep. 25, 2026
How we estimate Boeing's 8.9% WACC
Boeing also has preferred shares, a different kind of share that is due to turn into ordinary shares in 2027. That is why its WACC has an extra preferred-share term, P × Kp. Boeing's Jun. 2026 SEC quarterly report gives the share count, estimated debt value, preferred-share count, and dividend terms. The table links the outside market estimates separately. Dollar amounts are in billions unless marked per share.
| Part of the formula | Boeing | Where the number comes from |
|---|---|---|
| Value of ordinary shares (E) | $156.5B | $198.07 closing share price on Sep. 25 × 790.4 million shares reported as of Jul. 21 |
| Total money from investors and lenders (V) | $209.3B | Add E + D + P: $156.5B of ordinary shares + $45.7B of debt + $7.1B of preferred shares |
| Estimated cost of ordinary shares (Ke) | 9.7% | Start with the Sep. 25 10-year U.S. Treasury rate of 5.2%. Add beta × the 4.1% extra return estimated for stock-market risk on Sep. 1. For beta, start with a 0.85 estimate for similar companies and adjust for Boeing's borrowing: 0.85 × [1 + D/(E+P)] = 1.087. We assume no immediate tax saving from interest. |
| Borrowings (D) | $45.7B | Boeing's Jun. 30 SEC filing estimates its debt, excluding leases, at $45.4B. We add $0.3B of finance leases using their reported balance-sheet amount. |
| Estimated borrowing cost (Kd) | 6.1% | Sep. 25 yield for BBB-rated corporate bonds. This stands in for Boeing's current borrowing cost. |
| Assumed tax saving on interest (T) | 0.0% | We assume no immediate saving because Boeing's SEC filing describes losses and limits on using tax benefits. |
| Preferred shares (P) | $7.1B | $61.83 closing price per preferred-share unit on Sep. 25 × 115.0 million units reported in Boeing's filing |
| Estimated cost of preferred shares (Kp) | 9.7% | These shares must turn into ordinary shares in 2027, so we assume their required return matches Ke. Their 6.0% dividend rate alone does not measure the full return investors may require. |
Step 1. Add the funding sources: V = E + D + P = $209.3B
Step 2. Find each source's share of the total: E/V = 74.8%; D/V = 21.8%; P/V = 3.4%
Step 3. Weight and add the costs: WACC = 74.8% × 9.7% + 21.8% × 6.1% × (1 − 0.0%) + 3.4% × 9.7% = 8.9%
Boeing's own credit rating is BBB−, so a broad BBB bond rate may make its borrowing look cheaper than it really is. We also simplify the preferred shares by giving them the same required return as ordinary shares. A closer look at that security could change the result. Assuming no tax saving today does not mean Boeing can never benefit from a tax deduction in the future.
COMPARE THE SIZE OF THE GAP
How much higher should ROIC be than WACC?
There is no magic cutoff. A bigger gap leaves more room for a bad estimate or a weaker year. But a huge gap in one year is not enough. Check whether it lasts and whether the company can invest more money at a similar return.
The short answer
For this one measure, Company A ranks first, B second, and C third.
All three earned more than their estimated funding cost, but they are not tied. A's 80.0-point gap is larger than B's 40.0-point gap, which is larger than C's 5.0-point gap. This ranks only the ROIC-WACC comparison, not which stock will perform best.
| Example company | ROIC | WACC | ROIC minus WACC | What it means |
|---|---|---|---|---|
| A | 90.0% | 10.0% | +80.0 points | Largest gap, so A ranks first here. Check whether this unusually high return can last. |
| B | 50.0% | 10.0% | +40.0 points | Still a large gap, but smaller than A's. B ranks second here. |
| C | 15.0% | 10.0% | +5.0 points | C is above its estimated cost, but by less. A small change in profit or the cost estimate could erase the gap. |
Keep the numbers in order
For companies measured the same way, A's gap is larger than B's, and B's is larger than C's. Do not treat every positive result as a tie.
There is no magic threshold
A gap of 5.0 points leaves less room for error than a gap of 40.0 points. Any label such as "wide" or "narrow" is only a quick description, not a rule that makes stocks equal.
Check the size of the business too
A smaller percentage gap across a large amount of money can matter more in dollars than a huge gap across very little money.
- Use the same calculation method and the same time period for each company.
- Look at several years. One unusually good year can make a gap appear bigger than it normally is.
- Ask what price you would pay for the stock. A strong business can still be a poor investment if its shares are too expensive.
Four mistakes to avoid
- Assuming a high ROIC makes the stock a bargain. Even a great business can be a disappointing investment if you pay too much for its shares.
- Comparing numbers calculated in different ways. Two websites may count invested money differently. Check how each figure was calculated before putting them side by side.
- Looking at only one year. Several years and similar companies give you a better sense of whether a result is normal or unusual.
- Treating every type of business the same. A factory, software company, bank, and property business use money in different ways. Their ROIC figures may need different adjustments to make a fair comparison.
And that's why we made this site
- We compared ROIC and WACC for over 160 stocks. The results are here.
- We also give each stock one easy-to-scan tier score. It includes other signs of business strength and risk, not just this one comparison.
- The rankings can help you choose what to research next. They cannot predict what a stock will return.
Sources and further reading
- Apple's FY2025 annual report to the SEC provides the figures for our Apple ROIC calculation.
- Boeing's FY2025 annual report to the SEC shows its reported profit, the one-time sale gain, and the figures used for our adjusted ROIC calculation.
- Apple's Jun. 2026 quarterly SEC report and Boeing's Jun. 2026 quarterly SEC report provide company figures used in the WACC estimates.
- Morgan Stanley Counterpoint Global, “ROIC and the Investment Process” (2024) explains how analysts use ROIC, why they compare it with WACC, and why the comparison has limits.
- U.S. Treasury rates from Sep. 25, 2026, Damodaran's Jan. 2026 estimates of stock-market risk by industry, and his Sep. 1 estimate of the extra return investors require for stock risk provide outside market inputs. They do not come from the companies' SEC reports.