RBC Capital Markets Examines European Consumer Staples

A recent study of the European consumer staples sector by RBC throws up some interesting findings, especially in light of the underperformance of the sector in 2013 as shown by the following graph:

So, what gives?

RBC found that over the last decade, a company’s ‘Return on invested capital’ (ROIC) really had no correlation with how the stock performed in the market. RBC plotted ROIC with the company’s relative share performance and the resulting graph (below) shows this up effectively:

But surprise, surprise … what did work for share prices was growth in capital employed.