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.
Return on Invested Capital (ROIC)
Axon Enterprise 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 | 326,174) | 38,523) | 51,762) | 17,857) | 78,057) | |
| Invested capital2 | 1,607,800) | 1,262,920) | 722,746) | 500,291) | 631,660) | |
| Performance Ratio | ||||||
| ROIC3 | 20.29% | 3.05% | 7.16% | 3.57% | 12.36% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | -5.72% | -5.35% | — | — | — | |
| Caterpillar Inc. | 13.41% | 12.58% | — | — | — | |
| Eaton Corp. plc | 8.00% | 7.84% | — | — | — | |
| GE Aerospace | 2.73% | -2.53% | — | — | — | |
| Honeywell International Inc. | 11.54% | 12.33% | — | — | — | |
| Lockheed Martin Corp. | 21.60% | 22.51% | — | — | — | |
| RTX Corp. | 4.24% | 4.52% | — | — | — | |
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 × 326,174 ÷ 1,607,800 = 20.29%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a period of significant capital expansion and volatile earnings, culminating in a substantial increase in capital efficiency by the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- A highly volatile trajectory is observed in NOPAT. After a sharp decline from 78,057 thousand USD in 2018 to 17,857 thousand USD in 2019, profits fluctuated through 2021. However, a dramatic surge occurred in 2022, with NOPAT reaching 326,174 thousand USD, representing a significant increase in operational profitability compared to all previous years in the period.
- Invested Capital
- The capital base experienced a consistent upward trend following a slight contraction in 2019. Invested capital rose from 500,291 thousand USD in 2019 to 1,607,800 thousand USD by 2022. This steady growth indicates a period of aggressive investment in the business infrastructure or assets over a four-year span.
- Return on Invested Capital (ROIC)
- ROIC exhibited significant fluctuations, mirroring the volatility of NOPAT relative to the growing capital base. A marked decline occurred between 2018 and 2021, with the ratio dropping from 12.36% to a low of 3.05% in 2021. This period suggests that capital deployment was outpacing profit growth. This trend reversed sharply in 2022, as ROIC climbed to 20.29%, the highest level in the analyzed period, indicating that the expanded capital base began generating substantially higher returns.
The overall pattern suggests a strategic cycle of heavy investment from 2019 through 2021, which initially suppressed capital efficiency, followed by a realization of significant operational leverage and profitability in 2022.
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Decomposition of ROIC
Axon Enterprise Inc., decomposition of ROIC
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 »
The Return on Invested Capital (ROIC) exhibited significant volatility between 2018 and 2022, characterized by a sharp contraction in 2019, a moderate recovery in 2020, a secondary decline in 2021, and a substantial peak in 2022. The overall trajectory indicates a period of instability in capital productivity that culminated in a strong performance surge in the final year of the analyzed period.
- Operating Profit Margin (OPM)
- The OPM acted as the primary driver of ROIC fluctuations. After an initial margin of 18.00% in 2018, profitability contracted sharply to 4.88% in 2019 and reached a period low of 3.62% in 2021. This indicates a period of heightened operational costs or pricing pressures. However, a dramatic expansion occurred in 2022, with the margin rising to 26.29%, which served as the fundamental catalyst for the increase in ROIC to 20.29%.
- Turnover of Capital (TO)
- Capital turnover peaked in 2019 at 1.11, yet this increase in asset utilization was insufficient to offset the concurrent collapse in operating margins. Following 2019, a general downward trend is observed, with the ratio declining to 0.82 in 2021 and settling at 0.84 in 2022. This suggests a gradual reduction in the efficiency with which invested capital was used to generate revenue over the five-year horizon.
- Effective Cash Tax Rate (1 – CTR)
- The tax component demonstrated erratic movement, fluctuating from 91.06% in 2018 to 65.84% in 2019. A significant anomaly is noted in 2021, where the value rose to 102.26%, implying a negative effective cash tax rate. This suggests the realization of tax credits or deferred tax assets, which provided a marginal support to the ROIC during a year of weak operating profitability.
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Operating Profit Margin (OPM)
Axon Enterprise 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 | 326,174) | 38,523) | 51,762) | 17,857) | 78,057) | |
| Add: Cash operating taxes2 | 27,888) | (851) | 12,034) | 9,266) | 7,666) | |
| Net operating profit before taxes (NOPBT) | 354,062) | 37,672) | 63,795) | 27,123) | 85,723) | |
| Net sales | 1,189,935) | 863,381) | 681,003) | 530,860) | 420,068) | |
| Add: Increase (decrease) in deferred revenue | 156,728) | 176,131) | 69,381) | 24,367) | 56,151) | |
| Adjusted net sales | 1,346,663) | 1,039,512) | 750,384) | 555,227) | 476,219) | |
| Profitability Ratio | ||||||
| OPM3 | 26.29% | 3.62% | 8.50% | 4.88% | 18.00% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | -3.49% | -3.17% | — | — | — | |
| Caterpillar Inc. | 17.42% | 19.09% | — | — | — | |
| Eaton Corp. plc | 14.81% | 15.90% | — | — | — | |
| GE Aerospace | 4.46% | -2.35% | — | — | — | |
| Honeywell International Inc. | 19.83% | 21.58% | — | — | — | |
| Lockheed Martin Corp. | 11.60% | 11.85% | — | — | — | |
| RTX Corp. | 10.88% | 9.65% | — | — | — | |
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 sales
= 100 × 354,062 ÷ 1,346,663 = 26.29%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by consistent revenue expansion contrasted with significant volatility in operating profitability, culminating in a substantial margin expansion in the final year.
- Revenue Growth Trajectory
- Adjusted net sales exhibited a steady and uninterrupted upward trend throughout the five-year period. Revenue increased from 476,219 thousand US dollars in 2018 to 1,346,663 thousand US dollars by 2022, representing a significant scaling of operations.
- Operating Profitability Volatility
- Despite the growth in sales, the operating profit margin remained unstable between 2018 and 2021. The margin declined from 18.00% in 2018 to a low of 3.62% in 2021. This period was marked by fluctuating net operating profit before taxes, which dropped sharply in 2019 and 2021, suggesting that operating expenses grew at a rate that occasionally outpaced revenue growth.
- Operational Pivot in 2022
- A decisive shift in operational efficiency occurred in 2022. Net operating profit before taxes rose sharply to 354,062 thousand US dollars, leading to a record operating profit margin of 26.29%. This indicates a strong realization of operating leverage, where the increase in sales contributed disproportionately to the operating profit, significantly surpassing the profitability levels of the previous four years.
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Turnover of Capital (TO)
Axon Enterprise 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 sales | 1,189,935) | 863,381) | 681,003) | 530,860) | 420,068) | |
| Add: Increase (decrease) in deferred revenue | 156,728) | 176,131) | 69,381) | 24,367) | 56,151) | |
| Adjusted net sales | 1,346,663) | 1,039,512) | 750,384) | 555,227) | 476,219) | |
| Invested capital1 | 1,607,800) | 1,262,920) | 722,746) | 500,291) | 631,660) | |
| Efficiency Ratio | ||||||
| TO2 | 0.84 | 0.82 | 1.04 | 1.11 | 0.75 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | 1.31 | 1.26 | — | — | — | |
| Caterpillar Inc. | 1.03 | 0.87 | — | — | — | |
| Eaton Corp. plc | 0.67 | 0.67 | — | — | — | |
| GE Aerospace | 1.10 | 0.99 | — | — | — | |
| Honeywell International Inc. | 0.76 | 0.72 | — | — | — | |
| Lockheed Martin Corp. | 2.48 | 2.34 | — | — | — | |
| RTX Corp. | 0.61 | 0.58 | — | — | — | |
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 sales ÷ Invested capital
= 1,346,663 ÷ 1,607,800 = 0.84
3 Click competitor name to see calculations.
Between 2018 and 2022, a consistent upward trajectory in adjusted net sales is observed, with figures increasing from 476,219 thousand US$ to 1,346,663 thousand US$. This represents a substantial expansion in revenue generation over the five-year period. Concurrently, invested capital exhibited a more volatile pattern, experiencing an initial decrease in 2019 before entering a phase of rapid expansion starting in 2020 and continuing through 2022.
- Adjusted Net Sales Growth
- Revenue demonstrated uninterrupted annual growth, nearly tripling between 2018 and 2022. The most significant absolute increases occurred between 2020 and 2022, indicating an accelerating scale of operations.
- Invested Capital Dynamics
- Invested capital decreased from 631,660 thousand US$ in 2018 to 500,291 thousand US$ in 2019. However, from 2020 onward, there was a sharp increase in capital deployment, with the total reaching 1,607,800 thousand US$ by 2022. The surge in capital since 2020 suggests significant investments in the company's infrastructure or asset base to support scaling.
- Turnover of Capital (TO) Analysis
- The turnover of capital ratio peaked in 2019 at 1.11, driven by the simultaneous increase in sales and decrease in invested capital. Following this peak, the ratio entered a downward trend, falling to 0.82 in 2021 and stabilizing slightly at 0.84 in 2022. This decline indicates that in the later years, the growth of invested capital outpaced the growth of adjusted net sales, leading to a reduction in the efficiency of capital utilization relative to revenue generation.
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Effective Cash Tax Rate (CTR)
Axon Enterprise 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 | 326,174) | 38,523) | 51,762) | 17,857) | 78,057) | |
| Add: Cash operating taxes2 | 27,888) | (851) | 12,034) | 9,266) | 7,666) | |
| Net operating profit before taxes (NOPBT) | 354,062) | 37,672) | 63,795) | 27,123) | 85,723) | |
| Tax Rate | ||||||
| CTR3 | 7.88% | -2.26% | 18.86% | 34.16% | 8.94% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 25.42% | 24.06% | — | — | — | |
| Eaton Corp. plc | 19.89% | 26.02% | — | — | — | |
| GE Aerospace | 44.47% | — | — | — | — | |
| Honeywell International Inc. | 23.25% | 20.13% | — | — | — | |
| Lockheed Martin Corp. | 24.95% | 18.89% | — | — | — | |
| RTX Corp. | 36.10% | 18.64% | — | — | — | |
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 × 27,888 ÷ 354,062 = 7.88%
4 Click competitor name to see calculations.
The analysis of financial performance between 2018 and 2022 reveals significant volatility in both operating profitability and the resulting cash tax obligations. While Net Operating Profit Before Taxes (NOPBT) experienced substantial fluctuations during the first four years of the period, a dramatic surge in profitability occurred in the final year.
- Net Operating Profit Before Taxes (NOPBT) Trends
- NOPBT exhibited an inconsistent trajectory from 2018 to 2021, decreasing from $85.7 million in 2018 to a period low of $27.1 million in 2019, followed by a recovery to $63.8 million in 2020 and a subsequent decline to $37.7 million in 2021. The 2022 fiscal year marked a pivotal shift, with NOPBT expanding to $354.1 million, representing a substantial increase in operational earnings.
- Effective Cash Tax Rate (CTR) Volatility
- The effective cash tax rate demonstrated extreme variance and did not maintain a linear correlation with operating profits. The CTR reached its peak of 34.16% in 2019, which coincided with the lowest NOPBT of the early period. In contrast, 2021 saw a negative CTR of -2.26%, reflecting a cash tax benefit of $851 thousand despite the presence of positive operating profits.
- Analysis of Tax Efficiency and Scalability
- A notable divergence is observed in 2022, where NOPBT grew exponentially to $354.1 million, yet the effective cash tax rate remained relatively low at 7.88%. This indicates that the increase in cash operating taxes to $27.9 million did not scale proportionally with the surge in operating profit, resulting in a tax efficiency far greater than that observed during the 2019-2020 period.
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