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?
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