Warren Buffett has long favored companies that generate strong returns on invested capital (ROIC).
Businesses with high ROIC tend to be efficient, profitable, and capable of compounding over time, which are exactly the kind of qualities Buffett looks for.
Here are 10 high ROIC stocks, including a few companies that Buffett is invested in today.
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Here are three high-ROIC stocks that analysts think are undervalued today.
Apple (AAPL)
- Market Cap: $3 trillion
- Industry: Technology
- Analyst Upside: 21%
- P/E Ratio: 27
Company Overview: Apple is a global technology leader known for its iPhone, Mac, iPad, Apple Watch, and services like the App Store, Apple Music, and iCloud. Its ecosystem integrates hardware, software, and services to deliver a seamless user experience. This ecosystem also drives exceptional returns on capital.
Business Strategy: Apple generates revenue through premium hardware sales and a growing suite of services. The company focuses on innovation, user privacy, and expanding its ecosystem to drive customer loyalty and recurring revenue.
Recent Developments:
- Earnings & Profitability: Apple achieved record quarterly revenue, with strong performance in services and wearables offsetting challenges the company saw in some regions.
- Business Growth Trends: Apple is investing heavily in its artificial intelligence initiatives like Apple Intelligence. Additionally, the company is expanding manufacturing into new regions to dilute its complete reliance on China and mitigate supply chain risks.
- Shareholder Returns: Apple announced a significant stock buyback program, reinforcing its commitment to returning value to shareholders.
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The Home Depot (HD)
- Market Cap: $350 billion
- Industry: Specialty Retail
- Analyst Upside: 21%
- P/E Ratio: 24
Company Overview: The Home Depot is the largest home improvement retailer in the U.S., offering a wide range of products and services for DIY customers and professional contractors.
Business Strategy: The Home Depot company is focused on expanding its professional customer base, enhancing its digital platforms, and optimizing its supply chain so that the business can drive growth and efficiency.
Recent Developments:
- Earnings & Profitability: Home Depot reported a small increase in sales, with ongoing investments in supply chain and digital capabilities impacting short-term margins.
- Business Growth Trends: Home Depot has been busy recently opening new distribution centers and partnering with delivery services to enhance customer convenience.
- Shareholder Returns: The company has increased quarterly dividends for 16 consecutive years.
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Moody’s Corporation (MCO)
- Market Cap: $77 billion
- Industry: Capital Markets
- Analyst Upside: 20%
- P/E Ratio: 31
Company Overview: Moody’s is a leading provider of credit ratings, research, and risk analysis, operating through Moody’s Ratings and Moody’s Analytics.
Business Strategy: The company leverages advanced analytics and data to assess credit risk and provide insights, aiming to enhance decision-making for financial markets.
Recent Developments:
- Earnings & Profitability: Moody’s has seen strong revenue and earnings growth, supported by demand for credit ratings and analytical tools.
- Business Growth Trends: Moody’s acquired CAPE Analytics to integrate AI-driven geospatial data into its risk assessment models. This is expected to enhance the company’s analytical capabilities.
- Shareholder Returns: Moody’s continues to deliver consistent returns for shareholders through dividends and its share repurchase programs.
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TIKR Takeaway
On TIKR, you can explore how companies like Apple, Home Depot, and Moody’s stand out due to their high Return on Invested Capital (ROIC), which is a key metric that Warren Buffett likes to use.
For investors who like to follow Warren Buffett’s investing style, these stocks might be worth a closer look, because analysts think they’re undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
