ROIC-WACC spread
The difference between the return on invested capital and the cost of that capital.
Formula
\text{Spread} = ROIC - WACCBoth quantities are fractions of one over the same period. A positive spread means growth adds value, a negative one means growth destroys it.
How to read the number
Explains why growth is not always good: a company with a negative spread increases its losses as it grows revenue.
When the metric lies
The spread is measured over one year while returns on investment arrive with a lag. At a company in the middle of a build-out it is negative by construction.
Also known as: value spread