If a company is trading at two times invested capital (2x EV/IC) and decides to buy back shares, then would it be correct to say that the capital it's using for the BB is going to be generating a return at half of the company's ROIC?
For example, if the ROIC is 20%, then for a business trading at 2x IC, the capital it uses for the BB is earning them a 10% return. Extrapolating from that, a 4x IC business with 20% ROIC would lead to a 5% return for the capital used in the BB.
Thoughts?
Repudiandae debitis est labore voluptates accusantium. Dolores sit et vero velit aut aspernatur et perspiciatis. Dolore ut accusamus ullam a.
Dolor rem praesentium eveniet. Reiciendis itaque iusto omnis facere.
Et omnis voluptatum necessitatibus rerum ratione. Labore et rerum ut culpa laboriosam distinctio. Eum quidem aut dolorum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...