The growth path for the electric vehicle industry seems inevitable. Governments are using incentives to encourage consumers to make the switch. Investors have been along for the ride — shares of Tesla Inc. have risen more 87% over the past year, while Nio Inc.’s stock has gained 175%.
Some investors are already shying away from Tesla TSLA, +0.31% and Nio NIO, +2.02% because of those stocks’ high valuations relative to expected earnings and sales. You can see those numbers here. Shares of both of these EV manufacturers have cooled off — Tesla is down 3% for 2021, while Nio is down 21%.
A company’s ROIC is its earnings divided by the sum of its equity and debt. If you are comparing two similar companies, ROIC can provide insight into which management team deploys capital most efficiently. Taiwan Semiconductor makes computer chips used in various aspects of EV manufacturing. With $45.48 billion in sales for its most recently completed fiscal year, it ranks second among the 30 components of the iShares Semiconductor ETF SOXX, , which tracks the PHLX Semiconductor Index SOX, +0.10%.