Updated on January 24th, 2025 by Bob Ciura
Spreadsheet data updated daily
Return on invested capital, or ROIC, is a valuable financial ratio that investors can add to their research process.
Understanding ROIC and using it to screen for high ROIC stocks is a good way to focus on the highest-quality businesses.
With this in mind, we ran a stock screen to focus on the highest ROIC stocks in the S&P 500.
You can download a free copy of the top 100 stocks with the highest ROIC (along with important financial metrics like dividend yields and price-to-earnings ratio) by clicking on the link below:
Using ROIC allows investors to filter out the highest-quality businesses that are effectively generating a return on capital.
This article will explain ROIC and its usefulness for investors. It will also list the top 10 highest ROIC stocks right now.
Table Of Contents
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What Is ROIC?
Put simply, return on invested capital (ROIC) is a financial ratio that shows a company’s ability to allocate capital. The common formula to calculate ROIC is to divide a company’s after-tax net operating profit, by the sum of its debt and equity capital.
Once the ROIC is calculated, it is evaluated against a company’s weighted average cost of capital, commonly referred to as WACC.
If a company’s WACC is not immediately available, it can be calculated by taking a weighted average of the cost of a company’s debt and equity.
Cost of debt is calculated by averaging the yield to maturity for a company’s outstanding debt. This is fairly easy to find, as a publicly-traded company must report its debt obligations.
Cost of equity is typically calculated by using the capital asset pricing model, otherwise known as CAPM.
Once the WACC is calculated, it can be compared with the ROIC. Investors want to see a company’s ROIC exceed its WACC.
This indicates the underlying business is successfully investing its capital to generate a profitable return. In this way, the company is creating economic value.
Generally, stocks generating the highest ROIC are doing the best job of allocating their investors’ capital. With this in mind, the following section ranks the 10 stocks with the highest ROIC.
The Top 10 Highest ROIC Stocks
The following 10 stocks have the highest ROIC. Stocks are listed by 5-year expected annual returns, from lowest to highest.
High ROIC Stock #10: Domino’s Pizza Inc. (DPZ)
- 5-year annual expected returns: 10.3%
- Return on invested capital: 59.3%
Domino’s Pizza was founded in 1960. It is the largest pizza company in the world based on global retail sales. The company operates more than 21,000 stores in more than 90 countries.
It generates nearly half of its sales in the U.S. while 99% of its stores worldwide are owned by independent franchisees.
In early October, Domino’s reported (10/10/24) financial results for the third quarter of fiscal 2024. Its U.S. same store
sales grew 3.0% and its international same-store sales rose 0.8% over the prior year’s quarter.
Earnings-per-share grew only 0.2%, from $4.18 to $4.19, mostly due to provisions for higher taxes. Earnings-per-share exceeded the analysts’ consensus by $0.55.
Domino’s reiterated its bright 5-year outlook. It expects to open more than 1,100 stores per year and grow its global retail sales and its operating income by 7% and 8% per year, respectively, until the end of 2028.
Click here to download our most recent Sure Analysis report on DPZ (preview of page 1 of 3 shown below):
High ROIC Stock #9: Automatic Data Processing (ADP)
- 5-year annual expected returns: 10.3%
- Return on invested capital: 43.7%
Automatic Data Processing is one of the largest business services outsourcing companies in the world. The company provides payroll services, human resources technology, and other business operations to more than 700,000 corporate customers.
ADP posted first quarter earnings on October 30th, 2024, and results were better than expected on both the top and bottom lines. Adjusted earnings-per-share came to $2.33, which was 12 cents ahead of estimates.
Earnings were up from $2.08 in the year-ago period. Revenue was up 6.7% year-over-year to $4.8 billion, beating expectations by $30 million.
Management noted revenue and margin performance exceeded expectations as the company benefited from new business bookings, strong revenue retention and higher client funds interest revenue.
Employer Services revenue was $3.26 billion, up 7% year-over-year while segment earnings grew 15% to $1.16 billion. That was good enough from pretax margin to rise from 33.1% of revenue to 35.7%.
Click here to download our most recent Sure Analysis report on ADP (preview of page 1 of 3 shown below):
High ROIC Stock #8: Rollins Inc. (ROL)
- 5-year annual expected returns: 10.4%
- Return on invested capital: 27.5%
Rollins provides pest control and wildlife protection services. Its products control rodents, termite damage, and other insects. The company owns several leading brands and provides services and products to over two million residential and commercial customers in over 70 countries.
Rollins operates under one reportable segment and has three business segments: Residential, Commercial, and Termite. The United States is Rollins’s most critical geographic location, as it generates over 90% of its revenue.
On October 23rd, 2024, Rollins announced results for Q3 2024, reporting normalized EPS of $0.29 missing analysts’ estimates by $0.01. The company reported revenues of $892 million for the quarter, which were up 8.7% year-over-year.
Operating income rose by 8.3% to $192 million, although the operating margin slightly declined by 20 basis points to 20.9% compared to the same period last year. Adjusted operating income grew by 4.5% to $196 million, with an adjusted margin of 21.4%, impacted by a 90-basis point decrease due to increased investments in growth initiatives.
Adjusted EBITDA also saw a year-over-year increase of 5.5%, reaching $219 million with a 24.0% margin, down 80 basis points from last year.
Quarterly net income rose to $137 million, marking a 7.1% gain, while adjusted net income increased by 3.3% to $140 million. EPS grew by 7.7% to $0.28, and adjusted EPS rose by 3.6% to $0.29.
Click here to download our most recent Sure Analysis report on ROL (preview of page 1 of 3 shown below):
High ROIC Stock #7: Nike Inc. (NKE)
- 5-year annual expected returns: 12.5%
- Return on invested capital: 23.0%
Nike is the world’s largest athletic footwear, apparel and equipment maker. The namesake is one of the most valuable brands in the world. Nike’s offerings focus on six categories: running, basketball, the Jordan brand, football (soccer), training, and sportswear. Nike also owns Converse.
In early October, Nike released (10/1/24) results for the first quarter of fiscal 2025 (Nike’s fiscal year ends on May 31st). Sales and direct sales decreased -10% and -13%, respectively, vs. the prior year’s quarter.
Digital sales declined -20%. Gross margin expanded from 44.2% to 45.4% thanks to price hikes and lower input costs but earnings-per-share declined -26%, from $0.95 to $0.70, due to the sharp decrease in sales.
It still expects a mid-single digit decrease in revenues in fiscal 2025 due to challenging macroeconomic conditions but it also expects to resort to deep discounts in order to reduce inventory from high levels.
Click here to download our most recent Sure Analysis report on NKE (preview of page 1 of 3 shown below):
High ROIC Stock #6: Yum Brands Inc. (YUM)
- 5-year annual expected returns: 12.6%
- Return on invested capital: 44.6%
Yum Brands owns the KFC, Pizza Hut, Taco Bell, and The Habit Restaurants chains. It is present in more than 155 countries and has more than 59,000 restaurants, 60% of which are located abroad. KFC generates about half of the total revenue and operating profit of the company.
In early November, Yum Brands reported (11/5/24) results for Q3-2024. It grew its sales only 1% over last year’s quarter, as 5% growth of store count was almost offset by a -5% decline in same-store sales. KFC and Pizza Hut incurred pressure in same-store sales amid tough comparisons.
Digital sales were over $8 billion and exceeded 50% of total sales. Earnings per-share dipped -5%, from $1.44 to $1.37, and missed the analysts’ consensus by $0.04, mostly due to a higher tax rate.
Yum Brands keeps opening new stores at a fast pace this year and still expects 8% growth of operating income.
Click here to download our most recent Sure Analysis report on YUM (preview of page 1 of 3 shown below):
High ROIC Stock #5: EOG Resources (EOG)
- 5-year annual expected returns: 13.9%
- Return on invested capital: 22.0%
EOG Resources is a crude oil and natural gas company headquartered in Houston, Texas. It is principally engaged in the exploration, development, and production of crude oil and natural gas with reserves in the United States, Canada, Trinidad, and China.
EOG has three operating segments split by geographical areas: Crude oil, Natural Gas, and Natural Gas Liquids (NGL). Crude oil is the largest segment, which accounts for 79% of revenue.
On November 7th, 2024, EOG Resources reported its Q3 2024 results. For the quarter, EOG recorded total revenue of $5.97 billion, a slight decrease from $6.03 billion in the second quarter and down from $6.21 billion in Q3 2023.
Net income for the quarter was $1.67 billion, translating to earnings per share of $2.95, which was consistent with Q2 2024. The company generated a solid operating cash flow of $3.0 billion, a significant increase from $2.28 billion in Q2 2023, and produced $1.5 billion in free cash flow.
Total expenditure for the quarter were $1.57 billion. EOG’s cash and cash equivalents rose to $6.12 billion, and the company sustained a low debt-to-total capitalization ratio of 11.3%.
Click here to download our most recent Sure Analysis report on EOG (preview of page 1 of 3 shown below):
High ROIC Stock #4: Meta Platforms Inc. (META)
- 5-year annual expected returns: 14.7%
- Return on invested capital: 31.9%
Meta Platforms, previously known as Facebook, is multinational technology conglomerate known for its social media platforms, including Facebook, Instagram, and WhatsApp. It has also invested in emerging technologies such as augmented reality (AR) and virtual reality (VR) through its Oculus subsidiary.
With nearly 4 billion people logging into at least one of Meta’ platforms every month, the company attracts nearly 20% of all global advertising revenue, second only to Alphabet (GOOGL), which commands a substantial 40% market share. Meta Platforms generates nearly $160 billion in annual revenues, and is headquartered in Menlo Park, California.
On October 30th, 2024, Meta Platforms reported its Q3 results for the period ending June 30th, 2024. For the quarter, the company posted revenues of $40.6 billion, marking a strong growth of 19% compared to the previous year. Revenue growth was driven by increased user activity, growth in ad impressions, and higher ad pricing.
Click here to download our most recent Sure Analysis report on META (preview of page 1 of 3 shown below):
High ROIC Stock #3: Eli Lilly & Co. (LLY)
- 5-year annual expected returns: 14.7%
- Return on invested capital: 21.5%
Eli Lilly develops, manufactures, and sells pharmaceuticals around the world, and has about 35,000 employees globally. Eli Lilly should produce at least $45 billion of revenue in 2024.
On October 30th, 2024, Eli Lilly reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue grew 20.5% to $11.4 billion, but this was $680 million less than expected.
Adjusted earnings-per share
of $1.18 compared very favorably to adjusted earnings-per-share of $0.10 in the prior year, but this was $0.29 below estimates.
Volumes companywide were up 15% for the quarter and pricing added 6%, with currency acting as a 1% headwind to results. U.S. revenue grew 42% to $7.84 billion, as volume was up 27% and higher prices added 15%. International revenues fell 12% to $3.63 billion as volumes fell 10%. Pricing was unchanged.
Revenue for Mounjaro, which helps patients with weight management and is the company’s top gross product, totaled $3.11 billion, compared to $1.41 billion a year ago.
Click here to download our most recent Sure Analysis report on LLY (preview of page 1 of 3 shown below):
High ROIC Stock #2: MarketAxess Holdings (MKTX)
- 5-year annual expected returns: 14.8%
- Return on invested capital: 21.4%
MarketAxess Holdings is a fintech company operating an electronic trading platform for fixed income, such as corporate bonds, using patented trading technology.
The products traded on the platform are U.S. high-grade corporate bonds, emerging market bonds, U.S. crossover and high yield bonds, Eurobonds, U.S. agency bonds, municipal bonds, and others.
MarketAxess reported third quarter results on November 6th, 2024. Revenues for the quarter increased 20% year-over-year to $207 million. Operating income rose 30% to $87 million, and diluted EPS of $1.90 also increased 30% from the same prior year period.
The company’s estimated U.S. high-grade market share amounted to 19.5% for the quarter, down 50 basis points from the prior year’s market share estimates. Its estimated high-yield market share also declined 310 basis points from 16.1% in the third quarter of 2023 to 13.0% in Q3 2024.
Click here to download our most recent Sure Analysis report on MKTX (preview of page 1 of 3 shown below):
High ROIC Stock #1: Alphabet Inc. (GOOG)(GOOGL)
- 5-year annual expected returns: 16.3%
- Return on invested capital: 31.0%
Alphabet is a technology conglomerate that operates several businesses such as Google search, Android, Chrome, YouTube, Nest, Gmail, Maps, and many more.
Alphabet is a leader in many of the areas of technology that it operates.
On October 29th, 2024, Alphabet reported third quarter results for the period ending September 30th, 2024. Revenue grew 15.1% to $88.3 billion for the period and beat analysts’ estimates by $2.05 billion.
Adjusted earnings-per-share of $2.12 compared very favorably to $1.55 in the prior year and was $0.27 above expectations.
Once again, nearly every aspect of Alphabet’s business performed well during the quarter. Revenue for Google Search, the largest contributor to results, increased more than 12% to $49.4 billion.
YouTube ads grew 12.2% to $8.9 billion while Google Network declined 1.6% to $7.5 billion. Google subscriptions, platforms, and devices were up almost 28% to $10.7 billion.
Click here to download our most recent Sure Analysis report on GOOGL (preview of page 1 of 3 shown below):
Final Thoughts
There are many different ways for investors to value stocks. One popular valuation method is to calculate a company’s return on invested capital.
By doing so, investors can get a better gauge of companies that do the best job of investing their capital.
ROIC is by no means the only metric that investors should use to buy stocks. There are many other worthwhile valuation methods that investors should consider.
That said, the top 10 ROIC stocks on this list have proven the ability to create economic value for shareholders.
Further Reading
If you are interested in finding high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:
- The Dividend Aristocrats List: a group of elite S&P 500 stocks with 25+ years of consecutive dividend increases.
- The Dividend Champions List: a broader group of stocks with 25+ years of consecutive dividend increases, without the S&P 500 Index inclusion requirement.
- The Dividend Challengers List: stocks with 5-9 years of consecutive dividend increases.
- The Dividend Achievers List: a group of stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List: considered to be the best-of-the-best among dividend growth stocks, the Dividend Kings are a group of exceptional dividend stocks with 50+ years of consecutive dividend increases.
- The Blue Chip Stocks List: contains stocks on either the Dividend Achievers, Dividend Aristocrats, or Dividend Kings list.
- The Complete List of Monthly Dividend Stocks: stocks that pay dividends each month, for 12 payments over the year.