financial-metrics
ROA is net profit (sometimes operating profit after tax) divided by total assets. It is a crude asset-productivity ratio that mixes operating assets with cash, goodwill and financing structure.
The classroom formula:
ROA = Net profit / Total assets
Some credit analysts use EBIT(1 − t) / Assets to strip financing. Either way, total assets include surplus cash, goodwill from old deals, tax assets, and idle property. That is why ROIC — which aims at operating invested capital — is the valuation ratio, and ROA is at best a screen.
Illustration only. Hypothetical two peers, same EBIT.
| Asset-light services | Acquisition roll-up | |
|---|---|---|
| Net profit | €3.0m | €3.0m |
| Operating invested capital | €12m | €12m |
| Goodwill | €1m | €22m |
| Surplus cash | €2m | €2m |
| Total assets | €18m | €40m |
| ROA | 16.7% | 7.5% |
| ROIC (ex-goodwill, for organic view) | 18.8% | 18.8% |
The roll-up looks inferior on ROA because the denominator still carries purchase accounting. Whether you should include goodwill depends on the question (paying up for platforms vs running the shops).
Banks and asset-heavy utilities live at low ROA by design. Software without capitalised R&D can print high ROA that overstates economic return if you ignore the wage bill that built the code. Pair with asset turnover and working capital days.
Quick peer screens; DuPont ROE; lending discussions that still use total assets as exposure.
Mixing net profit with an unlevered-looking denominator. IFRS vs local GAAP asset recognition (leases, development costs). Average vs year-end assets. Inflation and fully depreciated plants.
Dazur calculates ROA for completeness and steers the conversation to ROIC and cash return. Matching investors on ROA alone would pair a cash-rich holdco with an operating company by accident.