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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- Statement of Comprehensive Income
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
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Return on Invested Capital (ROIC)
Alphabet Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2024 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT exhibited a fluctuating yet overall increasing trend from 2020 to 2024. It started at 41,262 million USD in 2020 and saw a significant rise to 77,747 million USD in 2021. However, this was followed by a decrease to 52,578 million USD in 2022. Subsequently, NOPAT increased again to 65,370 million USD in 2023 and further to 93,781 million USD in 2024, reaching the highest value in the observed period.
- Invested Capital
- Invested capital showed a consistent upward trend throughout the period. The value increased steadily from 145,844 million USD in 2020 to 171,408 million USD in 2021, then to 202,355 million USD in 2022. Despite a slight decline to 189,779 million USD in 2023, invested capital rose again to 227,952 million USD by 2024. Overall, there was significant growth in invested capital over the five years.
- Return on Invested Capital (ROIC)
- ROIC displayed considerable volatility over the period under review. It peaked at 45.36% in 2021 following the steep increase in NOPAT and invested capital. However, it dropped substantially to 25.98% in 2022. After this low point, ROIC rebounded to 34.45% in 2023 and improved further to 41.14% in 2024. This pattern indicates periods of fluctuating efficiency in generating returns from invested capital but with an overall strong performance in the later years.
- Summary
- The data reveals that while invested capital generally increased year-over-year, the NOPAT and ROIC experienced more pronounced fluctuations. The sharp rise and fall in NOPAT and ROIC between 2020 and 2022 suggest variability in operational efficiency or market conditions during that period. The recovery and subsequent growth in both NOPAT and ROIC in 2023 and 2024 signify an improvement in profitability and capital utilization, indicating effective management of resources in the latter years. The company's ability to increase invested capital alongside improving returns suggests a strategic approach to growth and value creation.
Decomposition of ROIC
Alphabet Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The analysis of the financial indicators over the observed periods reveals notable fluctuations and trends in the company's operational efficiency and profitability metrics.
- Operating Profit Margin (OPM)
- The operating profit margin exhibits variability, starting at 25.81% in 2020 and increasing significantly to 34.97% in 2021. This height is followed by a decline to 25.43% in 2022. However, the margin recovers in the subsequent years, reaching 33.67% by 2024. Overall, the trend demonstrates resilience and capacity for recovery in operational profitability after a dip.
- Turnover of Capital (TO)
- Capital turnover shows a generally positive trajectory with some fluctuations. It begins at 1.26 in 2020, rising to 1.51 in 2021. After a slight decrease to 1.4 in 2022, it peaks at 1.62 in 2023 before a minor reduction to 1.54 in 2024. This indicates an improvement in asset utilization efficiency over the period, despite occasional modest setbacks.
- 1 – Effective Cash Tax Rate (CTR)
- This metric, reflecting the proportion of earnings retained after cash taxes, decreases from 87.22% in 2020 to 72.91% in 2022, implying increasing tax expense or reduced tax efficiency. A partial reversal occurs in the following years, with values rising to 79.36% by 2024. The fluctuation suggests variability in tax burden management or changes in tax regulations impacting effective cash tax rates.
- Return on Invested Capital (ROIC)
- Return on invested capital experiences considerable volatility. Starting robustly at 28.29% in 2020, it escalates dramatically to 45.36% in 2021, followed by a substantial decline to 25.98% in 2022. The indicator then ascends again, reaching 41.14% by 2024. This pattern reflects significant changes in capital profitability, suggesting periods of enhanced efficiency alternating with phases of reduced return.
In summary, the company exhibits a pattern of fluctuating profitability and capital efficiency indicators, with strong recoveries after downturns. The operating profit margin and return on invested capital are particularly volatile yet generally trend towards improvement in the later years. Asset utilization demonstrates steady overall enhancement, while effective cash tax rate shows moderate variability, likely influenced by external tax factors.
Operating Profit Margin (OPM)
Alphabet Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibited notable fluctuations over the five-year period. Starting at 47,308 million US dollars in 2020, it nearly doubled to 90,371 million US dollars in 2021. However, the following year saw a decline to 72,109 million, before increasing again to 84,688 million in 2023. The upward trajectory continued sharply in 2024, reaching 118,165 million. This pattern indicates periods of strong growth interspersed with a temporary setback, followed by robust recovery and expansion.
- Adjusted Revenues
- Adjusted revenues consistently increased each year, demonstrating steady growth. The revenues rose from 183,285 million US dollars in 2020 to 258,436 million in 2021, followed by further increments to 283,520 million in 2022, 307,935 million in 2023, and culminating at 350,970 million in 2024. This persistent upward trend reflects sustained business expansion and effective revenue generation strategies.
- Operating Profit Margin (OPM)
- The operating profit margin showed considerable variation across the years. In 2020, the margin stood at 25.81%, increasing substantially to 34.97% in 2021. However, it then decreased to 25.43% in 2022 before rising to 27.5% in 2023. The margin improved significantly again in 2024, reaching 33.67%. These fluctuations suggest varying efficiency and cost management levels, with the company achieving peaks in profitability margins in 2021 and 2024, and experiencing reduced profitability efficiency in intermediate years.
- Overall Analysis
- Overall, the financial data indicate strong revenue growth accompanied by variable profit margins and fluctuating operating profits before taxes. The significant rise in revenues over the entire period underlines robust business scaling. However, the inconsistency in profit margins and net operating profit before taxes highlights challenges related to cost controls, operational efficiency, or external market conditions affecting profitability. The recovery and improvement in 2023 and 2024 suggest strategic adjustments or favorable market conditions that positively impacted financial outcomes.
Turnover of Capital (TO)
Alphabet Inc., TO calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Invested capital. See details »
2 2024 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The financial data over the five-year period demonstrates consistent growth in adjusted revenues, indicating an expanding business scale and increasing sales performance. From 2020 to 2024, adjusted revenues rose from US$183,285 million to US$350,970 million, reflecting a strong upward trajectory with an overall significant increase.
The invested capital also showed an upward trend but with more variability. Starting at US$145,844 million in 2020, it increased steadily through 2021 and 2022, peaking at US$202,355 million before experiencing a decline in 2023 to US$189,779 million. This was followed by a rebound in 2024 to US$227,952 million, which represents the highest invested capital level recorded in the observed timeframe.
The turnover of capital (TO) ratio fluctuated within a relatively narrow range, indicating variation in how efficiently the invested capital was being utilized to generate revenues. The ratio increased from 1.26 in 2020 to 1.51 in 2021, suggesting an improvement in capital efficiency. It then declined to 1.4 in 2022 but recovered again to 1.62 in 2023, the highest in the period, before slightly decreasing to 1.54 in 2024. These fluctuations suggest intermittent changes in operational efficiency or capital deployment strategies, despite an overall positive trend in generating revenues from invested capital.
- Adjusted Revenues
- Consistent strong growth over five years, nearly doubling from 2020 to 2024.
- Invested Capital
- General increase with a temporary decline in 2023, ending at the highest value in 2024.
- Turnover of Capital (TO) Ratio
- Variable but generally improving capital efficiency, peaking in 2023 with slight decrease thereafter.
In summary, the data reflect robust revenue expansion accompanied by an increasing level of invested capital and generally effective utilization of that capital, as indicated by the turnover ratios. The temporary dip in invested capital and turnover ratio fluctuations suggest periods where either capital deployment or operational efficiency adjusted, but the overall patterns point to a growing and increasingly productive business operation.
Effective Cash Tax Rate (CTR)
Alphabet Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Take-Two Interactive Software Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT displays a fluctuating but generally increasing trend over the five-year period. Starting at 47,308 million US$ in 2020, it nearly doubles to 90,371 million US$ in 2021. The figure then declines to 72,109 million US$ in 2022 before rising again to 84,688 million US$ in 2023 and reaching its peak at 118,165 million US$ in 2024. This indicates a pattern of volatility with overall growth in operating profitability before tax.
- Cash Operating Taxes
- Cash operating taxes show a substantial and consistent upward trend throughout the period, beginning at 6,046 million US$ in 2020 and approximately quadrupling by 2024 to 24,384 million US$. This steady increase suggests a growing tax burden on operating profits, consistent with the growth in pre-tax profits, though the tax increases are somewhat more pronounced.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate experiences significant variability. It starts at 12.78% in 2020 and slightly rises to 13.97% in 2021. A sharp increase occurs in 2022, where the rate rises to 27.09%, followed by a decrease to 22.81% in 2023 and further decline to 20.64% in 2024. This pattern suggests changes in tax planning, tax laws, or profit composition that impact the proportion of taxes paid relative to operating profits.
- Summary Insights
- Overall, operating profitability before taxes exhibits growth with fluctuations, while cash operating taxes rise steadily, reflecting higher absolute tax payments. The effective tax rate shows considerable variation, reaching a high in 2022 before moderating in subsequent years. The data implies dynamic tax management or varying tax environments alongside expanding profitability.