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Evaluating Investment Returns Into the Future by using Return on Capital
brendan daly, Member
If you can invest in firms with a high return on capital at bargain prices, you'll enjoy investment success.
The key to investment success over the long term is to buy companies with a high return on capital and buy them at bargain prices. These companies will display a high earnings yield and if you consider that they can maintain a high earnings yield into the future, then you should enjoy investment success as long as you are prepared to invest long term.
It seems to me, though I haven't tested it, that firm's with a strong competitive advantage are more likely to maintain high earnings into the future. I would be interested in programs that would enable this analysis....
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