A way to evaluate a company’s profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC).

Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business.

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders.