Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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- Income Statement
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Aggregate Accruals
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Return on Invested Capital (ROIC)
Align Technology Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net operating profit after taxes (NOPAT)
- The net operating profit after taxes displays significant fluctuations over the observed periods. Starting at 520,148 thousand USD in 2018, it increased to a peak of 1,236,388 thousand USD in 2021, before declining sharply to 536,671 thousand USD in 2022. This pattern suggests a notable spike in profitability in 2021, followed by a substantial reduction the subsequent year.
- Invested Capital
- Invested capital follows a general upward trend throughout the period. It grows steadily from 1,516,250 thousand USD in 2018 to 3,344,477 thousand USD in 2022, indicating increasing deployment of resources in the business. The most pronounced increases occur between 2019 and 2020, and again from 2021 to 2022.
- Return on Invested Capital (ROIC)
- ROIC exhibits considerable variability, reflecting changes in profitability relative to invested capital. It starts at 34.3% in 2018, rises to 41.28% in 2019, then falls sharply to 21.63% in 2020. A recovery is observed in 2021 with a ROIC of 41.34%, followed by a steep decline to 16.05% in 2022. This volatility indicates fluctuating efficiency in generating returns on the invested capital, with particularly low performance in 2020 and 2022.
- Overall Analysis
- The financial data depicts a company experiencing rapid changes in profitability and capital efficiency. Despite steadily increasing invested capital, the NOPAT and ROIC show inconsistent results, including significant peaks in 2021 contrasted by sharp decreases in 2022. Such trends suggest possible operational challenges or market conditions affecting profitability and capital utilization over recent years.
Decomposition of ROIC
Align Technology Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin exhibited fluctuations over the examined period. It started at 27.87% in 2018, followed by a slight increase to 28.55% in 2019. However, in 2020, there was a noticeable decline to 23.06%, before rebounding strongly to 33.28% in 2021. The margin then experienced a significant decrease in 2022, falling to 20.65%. This pattern indicates volatility in operational efficiency or cost structure, with a peak in 2021.
- Turnover of Capital (TO)
- The turnover of capital showed variability but generally remained within a moderate range. The ratio increased from 1.39 in 2018 to a peak of 1.7 in 2019. Thereafter, it decreased to 1.1 in 2020, improved to 1.47 in 2021, and finally decreased again to 1.18 in 2022. This indicates inconsistent asset utilization efficiency over the years with no clear upward or downward trend.
- Effective Cash Tax Rate Complement (1 – CTR)
- The complement of the effective cash tax rate stayed relatively stable from 2018 through 2021, ranging narrowly between approximately 84% and 89%. However, in 2022, it declined markedly to 65.79%, suggesting a significant increase in the cash tax rate or a reduction in tax benefits or credits utilized.
- Return on Invested Capital (ROIC)
- Return on invested capital presented a volatile pattern. It increased from 34.3% in 2018 to a high of 41.28% in 2019, then drastically declined to 21.63% in 2020. A sharp rebound occurred in 2021, reaching 41.34%, closely mirroring the 2019 peak. In 2022, ROIC fell significantly to 16.05%, indicating a substantial reduction in the efficiency of capital use to generate returns at the end of the period.
Operating Profit Margin (OPM)
Align Technology Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted net revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Adjusted net revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibited a generally positive trend from 2018 to 2021, increasing from 586,456 thousand USD in 2018 to a peak of 1,465,008 thousand USD in 2021. However, there was a notable decline in 2022, where the NOPBT dropped to 815,685 thousand USD. This decrease in 2022 represents a significant reduction from the previous year's peak, indicating potential challenges or adjustments in profitability during that period.
- Adjusted Net Revenues
- Adjusted net revenues showed consistent growth from 2018 through 2021, rising from 2,104,380 thousand USD to 4,401,700 thousand USD. In 2022, a decline to 3,949,386 thousand USD was observed. Despite this decrease, the revenue level remained substantially higher than the 2018 baseline, suggesting a contraction but not a reversal of growth over the five-year period.
- Operating Profit Margin (OPM)
- The operating profit margin fluctuated over the analyzed years. Starting at 27.87% in 2018, it slightly increased to 28.55% in 2019 before declining to 23.06% in 2020. A significant rebound to 33.28% occurred in 2021, the highest margin observed in the dataset. However, 2022 saw a sharp decline to 20.65%, the lowest operating margin in the period examined. This volatility in operating margins demonstrates fluctuating efficiency or cost management impacting profitability relative to revenues.
- Summary
- Overall, the data indicates a growth phase culminating in 2021 with peak net operating profit, revenues, and operating margins. The year 2022 stands out for a pronounced decline in all three key metrics, suggesting potential external or internal factors influencing performance. While revenues and profitability remain above earlier levels, the dip in 2022 could warrant further investigation into operational or market conditions affecting the company's financial performance.
Turnover of Capital (TO)
Align Technology Inc., TO calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenues | ||||||
| Adjusted net revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Invested capital. See details »
2 2022 Calculation
TO = Adjusted net revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Net Revenues
- The adjusted net revenues show a generally increasing trend from 2018 to 2022, with a notable peak in 2021 reaching approximately 4.4 billion US dollars. After that peak, there is a decline in 2022, with revenues falling to nearly 3.95 billion US dollars. Despite the decrease in the last year, the 2022 revenue remains significantly higher than the figures from 2018 to 2020, indicating overall growth over the five-year period.
- Invested Capital
- Invested capital exhibits a continuous upward trend throughout the analyzed years. Beginning at around 1.52 billion US dollars in 2018, the invested capital incrementally increases each year, reaching approximately 3.34 billion US dollars by 2022. This steady rise suggests ongoing investment in the company’s assets or operations.
- Turnover of Capital (TO)
- The turnover of capital ratio shows some volatility over the observed period. It starts at 1.39 in 2018, rises to a peak of 1.7 in 2019, then declines sharply to 1.1 in 2020. Following this dip, the ratio recovers somewhat to 1.47 in 2021 but decreases again to 1.18 in 2022. This fluctuation indicates variability in the efficiency with which the invested capital is utilized to generate revenues, with no consistent upward or downward trend.
Effective Cash Tax Rate (CTR)
Align Technology Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- Cash operating taxes increased steadily over the analyzed period, starting at $66.3 million in 2018 and reaching $279.0 million in 2022. The most significant jump occurred between 2020 and 2021, where taxes more than doubled from approximately $93.7 million to $228.6 million, followed by a moderate increase in 2022. This pattern suggests growing tax liabilities consistent with the company’s expanding operations or profitability.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT experienced fluctuations and an overall upward trend with some volatility. Beginning at $586.5 million in 2018, it increased to $741.2 million in 2019, then declined to $625.5 million in 2020. Thereafter, a substantial surge occurred in 2021, reaching $1.47 billion, followed by a decrease to $815.7 million in 2022. This indicates a period of rapid growth and possibly exceptional performance in 2021, with some reversion in the subsequent year.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate remained relatively stable around 11-16% from 2018 through 2021, fluctuating modestly between 11.31% and 15.61%. However, in 2022, the tax rate increased markedly to 34.21%, more than doubling the prior year's rate. This sharp increase could indicate changes in tax policy, reduced incentives, or increased taxable income not offset by credits or deductions, impacting the company's after-tax profitability.