Admantium, you have raised very good points. The goal in my write-up is the identifying which is the best ratio for measuring the current OPERATIONAL PERFORMANCE of a company and for this limited purpose ROIC is the best.
As stated even in the write-up, capital allocation (and capital structure) are independent & important issues that should be analyzed separately. Most other ratios such as ROE, ROA, ROCE mix them
The other points are about growth, the quality of growth, sustainability of ROIC, contingent liabilities, etc (and also valuation - the biggest elephant in the room) are again independent issues that need to be seen before investing but these issues are not about current operational performance. I have by no means suggested that one ratio is enough to say a company (or by extension- an investment) is “good” or “bad”. For e.g. a company with a bad ROIC but available at valuation which is at a discount to its liquidation value is likely to be a better investment than a company with high ROIC but very high valuation.
All I wanted to convey was that for measuring current operational performance ROIC is the best ratio
Always good to find other LOTR fans!
hcpl2000, thank you for your kind words. Unless the valuation of the Land+building is dramatically higher (for e.g.in the case of the Mumbai’s erstwhile Textile Mills or current land held by Amrutanjan- if I recollect correctly) it would not be worthwhile to value the same.