Capital allocation remains a key responsibility for company management, directly influencing value creation. However, not all senior executives have mastered effective capital allocation strategies.
A recent report updates an earlier analysis from December 2022, extending its review of data back to 1970 and incorporating results through 2024. The report also discusses available findings for the first half of 2025 where possible. It examines capital allocation decisions, return on invested capital (ROIC), and other financial metrics relevant to assessing corporate performance.
The analysis explores various options for allocating capital, including a new discussion on intangible investments. The report provides a guide for evaluating the potential for value creation within companies and concludes with a framework for judging a company's skill in allocating capital. This includes reviewing past behaviors, calculating ROIC, assessing incentives, and applying five core principles of effective capital allocation.
According to the report: "Counterpoint Global’s culture fosters collaboration, creativity, continued development, and differentiated thinking."
The document clarifies that ROIC measures the rate of return generated by a company on its invested cash. It also notes that the Russell 3000 Index tracks the largest 3,000 U.S. companies—representing about 98% of the investable U.S. equity market—and is reconstituted annually to ensure broad market representation.
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