One of the most reliable ways to build long-term wealth in the stock market is by owning companies that generate high returns on invested capital (ROIC). These businesses allocate capital efficiently, earn strong profits relative to what they reinvest, and tend to compound value over time.
High-ROIC companies often have durable competitive advantages, like a strong brand or cost efficiency, which help them outperform across market cycles. Here are 10 high-ROIC stocks that could be smart to hold through 2030.
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Here are a few of our favorite stocks from this list:
JD.com (JD)
- Market Cap: $48 billion
- Industry: Broadline Retail
- Analyst Upside: 56%
- P/E Ratio: 7.5
Company Overview: JD.com, Inc. is a leading Chinese e-commerce and logistics company, offering a wide range of products, including electronics, apparel, and household goods. It operates key segments like JD Retail, JD Logistics, and New Businesses.
Business Strategy: JD.com generates revenue primarily through its online retail platform, logistics services, and health products. The company is focusing on expanding its logistics capabilities and enhancing its technological infrastructure to drive efficiency and reach more consumers.
Recent Developments:
- Earnings & Profitability: JD.com’s revenue growth has slowed, but it remains profitable, with its logistics business continuing to be a major contributor to earnings.
- Business Growth Trends: JD’s logistics and health segments have seen growth, while its core e-commerce business faces increased competition and tightening margins.
- Shareholder Returns: The company is maintaining solid returns to shareholders, with dividends and strategic investments in technology driving future growth.
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Adobe Inc. (ADBE)
- Market Cap: $177 billion
- Industry: Software
- Analyst Upside: 17%
- P/E Ratio: 20
Company Overview: Adobe Inc. is a leading global software company best known for its Creative Cloud suite, which includes flagship tools like Photoshop, Illustrator, Premiere Pro, and Acrobat, used for design, video editing, document management, and digital media creation.
Business Strategy: Adobe generates revenue through subscription-based services across its Digital Media and Digital Experience segments. The company is focusing on integrating artificial intelligence into its offerings to enhance user experiences and drive growth.
Recent Developments:
- Earnings & Profitability: Adobe reported record revenue of $21.51 billion and strong operating cash flows, reflecting solid financial performance.
- Business Growth Trends: The company is seeing growth in its Digital Media segment, with significant progress in AI initiatives expected to further accelerate growth.
- Shareholder Returns: Adobe has authorized a $25 billion share repurchase program through 2028, reinforcing its commitment to returning value to shareholders.
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Rio Tinto Group (RIO)
- Market Cap: $106 billion
- Industry: Metals and Mining
- Analyst Upside: 26%
- P/E Ratio: 9.5
Company Overview: Rio Tinto Group is a leading global mining and metals company that focuses on the extraction and production of commodities such as iron ore, copper, aluminum, and diamonds.
Business Strategy: Rio Tinto generates revenue through the extraction, processing, and sale of natural resources, with a strong focus on cost efficiency, technological innovation, and sustainability. The company is positioning itself to reduce its carbon footprint and invest in future-facing technologies such as renewable energy.
Recent Developments:
- Earnings & Profitability: Rio Tinto reported solid financial results with strong cash flow, driven by high demand for its iron ore and copper, despite some challenges in commodity pricing.
- Business Growth Trends: The company is investing in renewable energy and exploring new growth opportunities in critical minerals to support the transition to a low-carbon economy.
- Shareholder Returns: Rio Tinto remains committed to returning value to shareholders, maintaining strong dividends, and its share buyback program.
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TIKR Takeaway
High-ROIC businesses are efficient compounders that can deliver outsized long-term returns.
Analysts think high-ROIC stocks like JD.com, Adobe, and Rio Tinto are undervalued today and could be worth a closer look.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
