Return on invested capital is

Return on invested capital is one of the most important metrics for identifying a high-quality company.

For example, if you bought $Alphabet(GOOG)$ at 8X price to book ratio and sold at 4X price to book ratio, your total return over 20 years would still be 560%.

But if you bought $IBM(IBM)$ at 7X price to book ratio and sold at 9X price to book ratio, your total return would only be 166%.

Why the massive difference? Google had a high return on invested capital. IBM did not.

"We've really made the money out of high-quality businesses. Over the long term, it's hard for a stock to earn a much better return than the business which underlies it earns." - Charlie Munger

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