Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company’s debt and equity structure. It measures business productivity performance.

Return on Invested Capital (ROIC)
Decomposition of ROIC
Operating Profit Margin (OPM)
Turnover of Capital (TO)
Effective Cash Tax Rate (CTR)

Amgen Inc., ROIC calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)¹	8,504	9,431	1,591	8,810	7,321
Invested capital²	37,391	25,226	24,118	32,328	34,875
Performance Ratio
ROIC³	22.74%	37.39%	6.60%	27.25%	20.99%
Benchmarks
ROIC, Competitors⁴
Abbott Laboratories	6.53%	6.19%	0.03%	3.53%	9.18%
AbbVie Inc.	14.72%	15.25%	3.87%	11.87%	13.20%
Biogen Inc.	42.59%	35.40%	23.16%	28.10%	32.03%
Bristol-Myers Squibb Co.	2.47%	28.27%	12.68%	24.80%	9.35%
Eli Lilly & Co.	22.93%	14.16%	-4.90%	13.83%	6.75%
Gilead Sciences Inc.	13.17%	18.93%	20.25%	68.44%	68.63%
Illumina Inc.	19.15%	19.42%	20.55%	15.77%	16.47%
Johnson & Johnson	12.94%	14.38%	3.55%	19.24%	21.25%
Merck & Co. Inc.	18.75%	12.05%	0.69%	5.02%	5.48%
Pfizer Inc.	14.16%	11.82%	-4.78%	6.18%	7.46%
Regeneron Pharmaceuticals Inc.	34.24%	37.16%	29.41%	22.47%	37.54%
Vertex Pharmaceuticals Inc.	27.62%	16.16%	0.62%	0.28%	-19.23%
Zoetis Inc.	15.96%	15.59%	13.93%	10.88%	7.81%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

¹ NOPAT. See details »

² Invested capital. See details »

³ 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 8,504 ÷ 37,391 = 22.74%

⁴ Click competitor name to see calculations.

Performance ratio	Description	The company
ROIC	A measure of the periodic, after tax, cash-on-cash yield earned in the business.	Amgen Inc.’s ROIC improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Amgen Inc., decomposition of ROIC


	ROIC	=	OPM¹	×	TO²	×	1 – CTR³
Dec 31, 2019	22.74%	=	46.69%	×	0.59	×	82.03%
Dec 31, 2018	37.39%	=	50.23%	×	0.89	×	83.33%
Dec 31, 2017	6.60%	=	50.31%	×	0.90	×	14.51%
Dec 31, 2016	27.25%	=	48.00%	×	0.68	×	83.85%
Dec 31, 2015	20.99%	=	43.83%	×	0.60	×	79.74%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

¹ Operating profit margin (OPM). See calculations »

² Turnover of capital (TO). See calculations »

³ Effective cash tax rate (CTR). See calculations »

The primary reason for the decrease in return on invested capital (ROIC) over 2019 year is the decrease in efficiency measured by turnover of capital (TO) ratio.

Amgen Inc., OPM calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)¹	8,504	9,431	1,591	8,810	7,321
Add: Cash operating taxes²	1,863	1,887	9,373	1,697	1,860
Net operating profit before taxes (NOPBT)	10,366	11,318	10,964	10,507	9,181

Product sales	22,204	22,533	21,795	21,892	20,944
Profitability Ratio
OPM³	46.69%	50.23%	50.31%	48.00%	43.83%
Benchmarks
OPM, Competitors⁴
Abbott Laboratories	14.97%	11.67%	11.07%	12.18%	14.96%
AbbVie Inc.	30.01%	19.46%	30.71%	34.32%	32.29%
Biogen Inc.	49.60%	44.64%	43.44%	44.68%	45.53%
Bristol-Myers Squibb Co.	18.78%	28.42%	25.35%	31.17%	13.17%
Eli Lilly & Co.	24.91%	15.94%	9.01%	15.95%	12.94%
Gilead Sciences Inc.	28.73%	41.64%	55.87%	59.42%	71.65%
Illumina Inc.	30.23%	27.22%	39.36%	24.75%	28.89%
Johnson & Johnson	21.00%	22.50%	23.33%	27.69%	28.57%
Merck & Co. Inc.	26.55%	21.38%	17.70%	12.62%	13.33%
Pfizer Inc.	35.34%	23.53%	23.75%	18.27%	21.52%
Regeneron Pharmaceuticals Inc.	33.76%	38.20%	34.45%	31.23%	39.36%
Vertex Pharmaceuticals Inc.	33.47%	21.74%	2.78%	2.86%	-41.40%
Zoetis Inc.	31.81%	32.17%	30.87%	25.67%	18.43%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

¹ NOPAT. See details »

² Cash operating taxes. See details »

³ 2019 Calculation
OPM = 100 × NOPBT ÷ Product sales
= 100 × 10,366 ÷ 22,204 = 46.69%

⁴ Click competitor name to see calculations.

Profitability ratio	Description	The company
OPM	The operating profit margin (OPM) is the ratio of pretax economic earnings, or NOPBT, to sales.	Amgen Inc.’s OPM deteriorated from 2017 to 2018 and from 2018 to 2019.

Amgen Inc., TO calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Product sales	22,204	22,533	21,795	21,892	20,944
Invested capital¹	37,391	25,226	24,118	32,328	34,875
Efficiency Ratio
TO²	0.59	0.89	0.90	0.68	0.60
Benchmarks
TO, Competitors³
Abbott Laboratories	0.55	0.52	0.42	0.46	0.67
AbbVie Inc.	0.53	0.98	0.62	0.53	0.52
Biogen Inc.	1.02	1.02	0.98	0.89	0.97
Bristol-Myers Squibb Co.	0.26	1.19	1.26	1.10	1.15
Eli Lilly & Co.	1.04	0.95	1.02	0.93	0.90
Gilead Sciences Inc.	0.69	0.61	1.04	1.49	1.17
Illumina Inc.	0.71	0.84	0.77	0.83	0.81
Johnson & Johnson	0.85	0.81	0.72	0.85	0.94
Merck & Co. Inc.	0.87	0.86	0.81	0.75	0.63
Pfizer Inc.	0.43	0.53	0.51	0.43	0.46
Regeneron Pharmaceuticals Inc.	1.21	1.08	1.20	1.45	1.57
Vertex Pharmaceuticals Inc.	0.86	0.79	0.79	0.57	0.39
Zoetis Inc.	0.64	0.62	0.71	0.72	0.68

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

¹ Invested capital. See details »

² 2019 Calculation
TO = Product sales ÷ Invested capital
= 22,204 ÷ 37,391 = 0.59

³ Click competitor name to see calculations.

Efficiency ratio	Description	The company
TO	The turnover of capital (TO) is the ratio of sales to invested capital. Capital turnover is a function of the efficiency of working capital management and of net fixed assets.	Amgen Inc.’s TO deteriorated from 2017 to 2018 and from 2018 to 2019.

Amgen Inc., CTR calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Net operating profit after taxes (NOPAT)¹	8,504	9,431	1,591	8,810	7,321
Add: Cash operating taxes²	1,863	1,887	9,373	1,697	1,860
Net operating profit before taxes (NOPBT)	10,366	11,318	10,964	10,507	9,181
Tax Rate
CTR³	17.97%	16.67%	85.49%	16.15%	20.26%
Benchmarks
CTR, Competitors⁴
Abbott Laboratories	21.15%	-1.36%	99.37%	37.12%	8.57%
AbbVie Inc.	7.43%	19.97%	79.78%	34.90%	21.63%
Biogen Inc.	15.53%	22.35%	45.79%	29.12%	27.39%
Bristol-Myers Squibb Co.	49.45%	16.35%	60.19%	27.36%	38.06%
Eli Lilly & Co.	11.34%	6.98%	153.07%	6.91%	41.90%
Gilead Sciences Inc.	33.35%	25.30%	65.27%	22.94%	18.16%
Illumina Inc.	10.66%	14.61%	31.76%	23.65%	29.58%
Johnson & Johnson	27.17%	20.74%	78.78%	18.53%	20.84%
Merck & Co. Inc.	19.06%	34.64%	95.19%	47.06%	34.62%
Pfizer Inc.	6.31%	4.80%	139.36%	21.23%	24.39%
Regeneron Pharmaceuticals Inc.	16.35%	10.01%	28.60%	50.27%	39.16%
Vertex Pharmaceuticals Inc.	3.62%	5.81%	72.05%	83.04%	—
Zoetis Inc.	21.17%	22.25%	36.23%	41.44%	38.13%

Based on: 10-K (filing date: 2020-02-12), 10-K (filing date: 2019-02-13), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-14), 10-K (filing date: 2016-02-16).

¹ NOPAT. See details »

² Cash operating taxes. See details »

³ 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 1,863 ÷ 10,366 = 17.97%

⁴ Click competitor name to see calculations.

Tax rate	Description	The company
CTR	Effective cash tax rate on operating income.	Amgen Inc.’s CTR decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Amgen Inc. (NASDAQ:AMGN)

Return on Capital (ROC)

Return on Invested Capital (ROIC)

Decomposition of ROIC

Operating Profit Margin (OPM)

Turnover of Capital (TO)

Effective Cash Tax Rate (CTR)