Return on Capital: 2.8% to 7.1%Thin moat

RTX (RTX) — moat facet

RTX's return on invested capital has risen from 2.8% to 7.1% since 2023, but it has not yet cleared an 8% cost of capital in any year since the merger.

The most important number about RTX is one it does not publish. Computed from its filings, its return on invested capital was 3.5% in 2021, 4.1% in 2022, 2.8% in 2023, 4.9% in 2024 and 7.1% in 20251. Against an assumed 8% cost of capital, RTX has not cleared the hurdle in any year since the merger.

Return on invested capital (%)WACC ~8%3.520214.120222.820234.920247.12025Moat Explorer calculation from SEC EDGAR XBRL; hurdle 8%
Rising, still under the line.

The reasons are the ones on the other pages: the goodwill, the powder-metal charge in 2023 and Pratt & Whitney's thin engine margins. The direction is the good news. The ratio has more than doubled since 2023 as operating profit went from $3,561 million to $9,300 million2.

Return on equity tells a similar story at a higher level: 10.7% in 20253, helped by debt.

A company can have a real moat and still earn a poor return, if it paid too much for the moat or spent too much defending it. RTX is that case: its franchises are durable, and the owners have so far earned less than they could have earned elsewhere.

The trend in operating profit explains the rise. RTX's segment operating profit was $6,233 million in 2021, $4,749 million in 2023 and $10,746 million in 202545, while the capital base, driven by goodwill fixed at purchase, barely moved. Each year of profit growth lifts the return almost one for one.

The ratio is the verdict on the merger. If it passes 8% in 2026 or 2027 on continued margin gains, the combination will finally be earning its cost; if it stalls near 7%, the 2020 deal will have been a fair price for a good business rather than a good price.

Moat trajectory: Widening

ROIC 2.8% (2023) to 7.1% (2025).

The number that tests this moat
Moat Explorer calc
Return on equity, full year
10.7% (2025)

Shareholders' return with leverage included; a rise with falling debt would mean operations, not borrowing, are lifting it.

How it's calculated: Net income attributable ($6,732M) divided by average shareowners' equity (($65,245M + $60,156M) / 2) for 2025, from the FY2025 10-K.
Source: Moat Explorer calculation: RTX valuation and balance sheet ↗
⚠ Threats to the moat
⚠ THREAT 01
Twenty-Nine Billion Dollars of Net Debt
RTX's net interest cost is about 19% of its operating profit, partly the legacy of a $10 billion buyback financed with debt.
References
  1. Moat Explorer calcComputed from its filings, its return on invested capital was 3.5% in 2021, 4.1% in 2022, 2.8% in 2023, 4.9% in 2024 and 7.1% in 2025.
    Moat Explorer calculation, tools_roic_edgar.py method on SEC EDGAR XBRL for CIK 101829: return on invested capital 3.5% (2021), 4.1% (2022), 2.8% (2023), 4.9% (2024), 7.1% (2025); -1.5% in 2020. Earlier years are on United Technologies' pre-2020 basis and are not comparable. — 2020-2025 · publ. September 2026 · source ↗
    Method: NOPAT (operating income x (1 - effective tax rate)) divided by average operating invested capital (total assets less current liabilities less cash), from SEC EDGAR XBRL using the tools_roic_edgar.py method. The 8% hurdle is an assumed cost of capital.
  2. ReportedThe ratio has more than doubled since 2023 as operating profit went from $3,561 million to $9,300 million.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  3. Moat Explorer calcReturn on equity tells a similar story at a higher level: 10.7% in 2025, helped by debt.
    Moat Explorer calculation from RTX's Form 10-K FY2025, Q2 2026 earnings release and market data ($ millions unless stated). Goodwill plus intangibles 53,343 + 31,845 = 85,188; 85,188 / 171,079 = 49.8% of total assets; other assets 171,079 - 85,188 = 85,891. Reported against adjusted EPS 2025: 6.29 - 4.96 = 1.33, of which 1.15 acquisition accounting. Return on equity 6,732 / ((65,245 + 60,156) / 2) = 10.7%. Net debt: 37,700 + 204 - 7,435 = 30,469 (December 2025); 31,858 + 5,296 + 229 - 8,305 = 29,078 (June 2026). Net interest 1,749 / operating profit 9,300 = 18.8%. Dividends paid 3,574 / free cash flow 7,940 = 45%; free cash flow covers dividends 7,940 / 3,574 = 2.2 times. Pension items 753 + 1,182 = 1,935; 1,935 / net income 6,732 = 29%. Trailing twelve months to June 2026: revenue 88,603 + 46,784 - 41,887 = 93,500; net income 6,732 + 4,198 - 3,192 = 7,738. P/E 255.27 / 7.738 = 33.0; P/S 255.27 / 93.50 = 2.73. Year-end P/E = market value / net income and P/S = market value / revenue: 2021 128.81 / 3.864 = 33.3 and 128.81 / 64.388 = 2.00; 2022 148.36 / 5.197 = 28.5 and 2.21; 2023 120.99 / 3.195 = 37.9 and 120.99 / 68.920 = 1.76; 2024 154.03 / 4.774 = 32.3 and 1.91; 2025 245.90 / 6.732 = 36.5 and 2.78; 2020 108.60 / 56.587 = 1.92 (loss year). Revenue growth since 2023: 93.50 / 68.92 - 1 = 36%; market value 255.27 / 120.99 = 2.1 times. Share price against 52-week high 189.40 / 226.88 - 1 = -16.5%. Peers: Lockheed Martin plus General Dynamics 121.09 + 92.75 = 213.84 (below RTX's 255.27); RTX / Northrop Grumman 255.27 / 73.08 = 3.5 times. Q2 2026 operating margin 2,811 / 24,708 = 11.4%. Price over 2025 adjusted EPS 189.40 / 6.29 = 30 times. 2024 legal and termination cash 1.5 / free cash flow 4.534 = 33%. Pension sensitivity about 1.0 billion per 25 basis points, so about 4 billion per point; 4,000 / equity 65,245 = 6%. Enterprise value over trailing sales 285.82 / 93.50 = 3.1 times; price over 2026 consensus adjusted EPS 189.40 / 7.24 = 26 times. Purchase obligations after 2026 about 47 - 29 = 18 billion. Forecast extension: 2028 revenue 103.18 x 1.07 = 110.40 and EPS 7.85 x 1.084 = 8.51, extending 2027 consensus growth (not consensus). — 2020-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in RTX's Forms 10-K and 10-Q, earnings releases, earnings call and market data; operands shown in the source line.
  4. ReportedRTX's segment operating profit was $6,233 million in 2021, $4,749 million in 2023 and $10,746 million in 2025, while the capital base, driven by goodwill fixed at purchase, barely moved.
    RTX Form 10-K for fiscal 2023 - the three-segment recast of 2021-2022, the GTF family powering more than 1,700 aircraft for 70 operators, backlog of $196 billion, the Carrier and Otis separation and Chinese sanctions on Raytheon Missiles & Defense. — FY2023 · publ. February 2024 · source ↗
  5. ReportedRTX's segment operating profit was $6,233 million in 2021, $4,749 million in 2023 and $10,746 million in 2025, while the capital base, driven by goodwill fixed at purchase, barely moved.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - totals across segments: segment sales and profit, eliminations, acquisition accounting and FAS/CAS adjustments. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026