Why CROIC Is Our Favourite Profitability Metric

  There are many ways to measure profitability—gross margin, net margin, return on assets (ROA), return on equity (ROE)—each with its place depending on the industry and business model. However, for a clear view of value creation, we consistently rely on Cash Return on Invested Capital (CROIC). CROIC, calculated as: (Cash from Operations – Maintenance Capex) / Invested Capital, measures the cash yield on all capital invested (equity and debt). This aligns directly with how shareholder value is created: by earning returns above a company’s weighted average cost of capital (WACC).

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  Our investment philosophy – ‘Quality-Growth’ Investing can feel overwhelming, especially when you're just getting started. But at Stock Knight, we believe that owning a small number of truly exceptional companies, and holding them for the long term, is one of the simplest and most powerful ways to build wealth. This is the foundation of quality-growth investing. What is Quality-Growth Investing? Quality-growth investing means buying and holding shares in companies that combine high profitability with durable, long-term growth. These aren’t just companies that are growing today, they’re companies with strong fundamentals that can keep growing and compounding value for many years to come. While interpretations may vary, most investors broadly agree on a set of key characteristics that define such companies. For us, ‘quality-growth’ refers to companies with the following attributes: ·          High returns on capital – This shows a ...