This is a unique indicator that could boost your portfolio returns significantly. Using this formula consistently leads to reliable 30% annual returns. Deutsche Bank invented it. Goldman Sachs uses it extensively in its stock selection:
Cash return on capital invested (CROCI)
CROCI measures how much cash a company produces on the capital it has had invested in it. It’s a measure of efficiency. It’s harder to manipulate cash than it is to manipulate earnings or profits.
The higher the CROCI, the better. Look at companies with a CROCI score of 10 or higher.
It is not rocket science and almost too obvious: Companies that produce more cash on the capital they have perform better. They produce more cash by generating more sales and having fewer expenses.
Research shows that while companies with high cash returns are relatively expensive, they outperform nevertheless. Still, most investors think such companies won’t continue growing and are too expensive. And that’s simply not the case.
CROCI can help you to achieve truly great returns
Sven Franssen