Why Apple and Pool Corp. Are Winning the ROCE Race: A Blueprint for Sustainable Growth

The investment landscape is littered with companies that once dominated their industries but faltered as their business models became obsolete. Today, the divide between those leveraging installed base economics and those clinging to outdated revenue streams has never been clearer. In this deep dive, we analyze how Apple (AAPL) and Pool Corp (POOL) are outperforming Kraft Heinz (KHC) by capitalizing on recurring revenue engines, while Kraft Heinz’s stagnant product portfolio and declining capital efficiency paint a stark contrast.

The ROCE Divide: A Metric That Separates Winners from Losers

ROCE (Return on Capital Employed) measures how effectively a company generates profits from the capital it deploys. Over the past five years, Apple’s ROCE has more than doubled, reaching 48.1% in 2023, before settling at 47.2% in 2024—a testament to its ability to extract value from existing assets. Meanwhile, Kraft Heinz’s ROCE has oscillated between -0.26% (2022) and 2.16% (2024), reflecting poor capital allocation and declining operational efficiency. Pool Corp, though its ROCE has dipped from 37.5% in 2022 to 24.5% in 2024, still outperforms KHC by a wide margin, underscoring its resilience in a challenging market.

Apple: The Services Flywheel

Apple’s services-driven model—anchored in subscriptions (Apple Music, iCloud), app store transactions, and its ecosystem of hardware/software integration—has created a $89 billion annual services revenue stream with 30%+ margins. This is no accident:

• Installed Base Economics: Over 2 billion active Apple devices globally act as recurring revenue levers. Every iPhone sold becomes a gateway to paid services, creating a compounding flywheel.
• Capital Efficiency: Apple’s ROCE remains 47.2%, nearly 20x higher than Kraft Heinz’s, because it monetizes its existing asset base (patents, software, brand equity) without heavy reinvestment.

In contrast, Kraft Heinz’s reliance on commodity-based packaged goods (ketchup, condiments) lacks pricing power and recurring demand. Its ROCE struggles reflect a business model dependent on volume-driven sales in a mature, low-margin industry.

Pool Corp: The Recurring Revenue Machine

Pool Corp’s dominance in the $10 billion residential pool maintenance market is underappreciated. Its 449 sales centers and POOL360 digital platform create a sticky, recurring revenue stream:

• Maintenance Market Growth: 85% of pool owners require annual chemical refills and repairs—a predictable, $2,000/year per customer spend.
• ROCE Resilience: Despite a 2024 ROCE dip to 24.5% (due to macro pressures like inflation), its margin profile remains robust. Pool Corp’s $617 million EBIT in 2024 was generated with $2.5 billion in capital employed, far better than KHC’s EBIT/Capital ratio.

Kraft Heinz: A Victim of Its Own Stagnation

Kraft Heinz’s decline is a cautionary tale of complacency in a changing market:

• Portfolio Rot: Its 2015 merger combined underperforming brands (Heinz ketchup, Oscar Mayer) with little innovation. Today, 70% of revenue comes from brands over 50 years old.
• ROCE Collapse: A ROCE of 2.16% in 2024—barely above zero—reveals capital employed ($81.7 billion) isn’t generating returns. Its 2024 EBIT of $1.77 billion pales against Apple’s $148 billion.

Worse, KHC’s debt-laden balance sheet (total debt $1.0 billion as of Q1 2025) and stagnant sales (4% decline in 2024) signal no path to recovery.

Valuation vs. Growth: Where to Deploy Capital?

Metric	Apple (AAPL)	Pool Corp (POOL)	Kraft Heinz (KHC)
Forward P/E	28.5	25.1	22.3
ROCE (2024)	47.2%	24.5%	2.16%
5Y EPS CAGR	12.3%	8.9%	-1.5%

Apple and Pool Corp trade at premium valuations, but their sustainable growth profiles justify it. Apple’s services segment grows 10%+ annually, while Pool Corp’s network expansion (adding 2 sales centers in Q1 2025) fuels recurring revenue. KHC’s sub-3% ROCE and negative EPS growth make it a value trap.

Investment Thesis: Buy Apple/Pool, Avoid KHC

1. Apple (AAPL):
2. Buy Below $200: A pullback to $180 offers a compelling entry.

3. Rationale: Services flywheel, high ROCE, and $260 billion in cash provide a margin of safety.

4. Pool Corp (POOL):

5. Hold for Long-Term: Despite ROCE dips, its maintenance model is recession-resistant.

6. Catalyst: Expansion of POOL360 and greenfield sales centers will boost margins.

7. Avoid KHC:

8. Short or Sell: Its lack of innovation and poor capital allocation make it a structural underperformer.

Final Thought: Capital Efficiency = Survival

In an era of macroeconomic uncertainty, companies that convert capital into recurring profits will thrive. Apple and Pool Corp are engineering moats through services and maintenance, while Kraft Heinz’s reliance on static brands ensures obsolescence. The choice is clear: bet on the ROCE kings, not the kings of yesteryear.

Act now—before the gap widens further.