⏳Sifting for Quality

To isolate businesses capable of consistently generating elite capital returns, we analysed a decade of historical performance (2016–2026) using our favourite capital efficiency metric: cash return on capital.

The formula used was:

Cash ROC = FCF/(Total Assets−Current Liabilities−Goodwill)

By stripping out current liabilities and goodwill, we isolate operational assets.

A stellar standalone year, on a return on capital basis, can be misleading. Therefore, to capture the long-term impact of capital efficiency, I looked at the following metrics over the 10-year period:

• Current Cash ROC: This reflects the immediate capital efficiency.
• 10-Year Maximum & Minimum: This highlights to us both the peak and the operational floor during cyclical downturns.
• 10-Year Average: This gives us the average capital performance.
• 10-Year Standard Deviation (SD): Lastly, this indicates predictability and volatility of returns. Lower variance indicates more reliability.

So here are the results: