🧮 CF ROIC Calculation
Understanding ROIC
Return on Invested Capital (ROIC) measures how efficiently a company uses its capital (both debt and equity) to generate profits. For CF, the current ROIC is 20.87%.
Why ROIC is the Best Quality Metric
Charlie Munger famously said: "Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns." ROIC is superior to other return metrics because it measures returns on ALL capital employed — both debt and equity. Companies with consistently high ROIC often have durable competitive advantages (moats).
This is not just investing folklore. In Zyberno's survivorship-free audit of 16 fundamental metrics on the complete S&P 500 (2010–2024), ROIC was the single most predictive screen of them all — the widest return spread of any metric tested, stable across both halves of the period — and it out-predicted ROE, the most popular quality metric, roughly seventeen-to-one on identical firms.
ROIC Benchmarks
Excellent: >20%
Indicates a potential economic moat. The company generates exceptional returns on capital, suggesting strong competitive advantages.
Good: 12-20%
Above-average capital efficiency. The company creates value for shareholders by earning returns well above its cost of capital.
Average: 8-12%
Typical for most companies. Returns roughly match the weighted average cost of capital (WACC) for many businesses.
Poor: <8%
Below cost of capital for many companies. May indicate the company is destroying value through poor capital allocation.
ROIC vs ROE vs ROA
ROE: 30.63% →
Return on Equity only measures returns on shareholder equity. Can be inflated by high leverage. In Zyberno's 16-screen audit, ROIC out-predicted ROE roughly seventeen-to-one on identical firms.
ROA: 17.24%
Return on Assets measures returns on total assets. Useful but doesn't distinguish between debt and equity financing.
Owner Earnings: $1.8B →
Buffett's preferred earnings metric. ROIC tells you how efficiently capital is used; Owner Earnings shows the actual cash generated.
Free Cash Flow: $1.6B →
Actual cash after capex. High ROIC companies typically generate strong free cash flow relative to their invested capital.
What to Look For
- Consistency: Stable or improving ROIC over multiple years
- Above WACC: ROIC should exceed the company's cost of capital (typically 8-10%)
- Industry comparison: Compare to peers — above-average ROIC often signals a moat
- Capital allocation: High ROIC + good reinvestment opportunities = compounding machine
📊 Full CF Stock Report →
Intrinsic value, margin of safety, DCF valuation, and 250+ metrics.
📈 CF ROE →
Compare ROIC to Return on Equity and understand the impact of leverage on returns.
💹 CF P/E Ratio →
Analyze valuation relative to earnings — how the market prices CF's profitability.
👤 CF Owner Earnings →
Warren Buffett's preferred measure of true economic earnings available to owners.
💵 CF Free Cash Flow →
See actual cash generation after capital expenditures.
💰 CF Net Income →
See the bottom-line profit that drives ROE calculations.
Summary: CF Capital Efficiency
CF INDUSTRIES HOLDINGS, INC. (CF) has a ROIC of 20.87%, which Zyberno classifies as excellent for a Materials company — above the 12% threshold Zyberno applies to commodity and materials businesses where capital requirements are high and pricing is cyclical. Combined with an ROE of 30.63% and ROA of 17.24%, Zyberno uses ROIC as its primary measure of capital quality because it accounts for both debt and equity and is harder to inflate with leverage. For complete financial analysis, view the full CF stock report on Zyberno.
Frequently Asked Questions
What is CF's current ROIC?
CF INDUSTRIES HOLDINGS, INC.'s Return on Invested Capital (ROIC) is 20.87%, measured against the 12% excellent threshold Zyberno applies to Materials businesses. ROIC measures how efficiently the company generates returns on both debt and equity capital.
Is CF's ROIC good?
CF INDUSTRIES HOLDINGS, INC. (CF) has a ROIC of 20.87%, which Zyberno classifies as excellent for a Materials company — above the 12% threshold Zyberno applies to commodity and materials businesses where capital requirements are high and pricing is cyclical.
What is the difference between ROIC and ROE?
ROIC measures returns on ALL capital (debt + equity), while ROE only measures returns on shareholder equity. CF's ROIC is 20.87% vs ROE of 30.63%. ROE can be artificially inflated by high debt levels, making ROIC a more reliable quality metric.
Why do Buffett and Munger focus on ROIC?
Warren Buffett and Charlie Munger focus on ROIC because it measures the true efficiency of capital allocation. High ROIC companies can reinvest profits at attractive rates, creating compounding wealth over time.
📊 Full CF Stock Report →
See CF's intrinsic value, margin of safety, DCF valuation, and complete financial analysis with 250+ metrics.
📈 CF ROE →
Compare to Return on Equity and understand the impact of leverage on returns.
💹 CF P/E Ratio →
Analyze the price-to-earnings ratio and earnings yield as a valuation metric.
🎯 CF Earnings Surprise (SUE) →
See whether CF is beating or missing its own earnings trend — Standardized Unexpected Earnings and post-earnings drift.
👤 CF Owner Earnings →
Warren Buffett's preferred measure of true economic earnings available to owners.
💰 CF Net Income →
See the bottom-line profit that drives return calculations.
📊 CF EPS →
Earnings per share — net income on a per-share basis.