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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- Common-Size Income Statement
- Analysis of Profitability Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Aggregate Accruals
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Return on Invested Capital (ROIC)
CoStar Group Inc., ROIC calculation
| 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 | ||||||
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 × ÷ =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows an overall increasing trend from 2018 to 2022, but with notable fluctuations. Starting at 240,403 thousand US dollars in 2018, there was a significant rise to 333,240 thousand US dollars in 2019. However, in 2020, NOPAT declined sharply to 250,569 thousand US dollars. Following this decline, the figure rebounded strongly in 2021 to 362,411 thousand US dollars before decreasing again to 321,495 thousand US dollars in 2022.
- Invested Capital
- Invested capital increased substantially over the five-year period. Beginning at 3,312,194 thousand US dollars in 2018, it rose moderately to 3,711,336 thousand US dollars in 2019. A marked surge occurred in 2020, with invested capital nearly doubling to 6,661,421 thousand US dollars. This upward momentum continued with 7,034,732 thousand US dollars in 2021 and further to 8,182,919 thousand US dollars in 2022, indicating a consistent expansion of the asset base or capital investments made by the company.
- Return on Invested Capital (ROIC)
- Return on invested capital exhibited a declining trend overall despite some variation. Starting at 7.26% in 2018, the ROIC improved to 8.98% in 2019. However, it then dropped significantly to 3.76% in 2020, followed by a slight recovery to 5.15% in 2021. The measure fell again to 3.93% in 2022. The decreasing ROIC trend suggests a reduction in the efficiency with which the company is generating returns from its invested capital.
- Summary of Trends and Insights
- The company's NOPAT demonstrates volatility with periods of both growth and decline, reflecting possible fluctuations in operational efficiency or market conditions. Despite growing invested capital substantially, especially from 2020 onwards, the return generated on this increased capital has generally decreased. This divergence indicates that while the company is committing more resources, it is achieving relatively lower returns on those investments over time. The reduced ROIC could warrant further investigation into the factors influencing operational performance or investment strategies during these years.
Decomposition of ROIC
CoStar Group 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 experienced fluctuations between 2018 and 2022. It peaked in 2019 at 28.1%, followed by a significant decline to 18.65% in 2020. Subsequently, the margin partially recovered in 2021 to 23.28% but decreased again to 21.18% by the end of 2022. Despite these variations, the OPM generally remained above 20% in most years, except for the notable dip in 2020.
- Turnover of Capital (TO)
- Turnover of capital showed a steady decline over the period. Starting at 0.36 in 2018, it increased slightly to 0.38 in 2019, but then experienced a sharp decrease to 0.25 in 2020. The ratio stabilized somewhat in the following years, with small variations at 0.28 in 2021 and 0.27 in 2022, indicating reduced efficiency in asset utilization over time.
- 1 – Effective Cash Tax Rate (CTR)
- The metric representing one minus the effective cash tax rate declined consistently from 85.8% in 2018 to 69.33% in 2022. This trend suggests a progressive increase in tax expenses relative to cash flows, with the most pronounced decrease occurring between 2021 and 2022.
- Return on Invested Capital (ROIC)
- Return on invested capital showed considerable volatility. It improved from 7.26% in 2018 to a peak of 8.98% in 2019, after which it dropped sharply to 3.76% in 2020. There was a moderate recovery to 5.15% in 2021, followed by a decline to 3.93% in 2022. Overall, ROIC suggests challenges in generating returns from invested capital, particularly after 2019.
Operating Profit Margin (OPM)
CoStar Group Inc., OPM calculation
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 revenues
= 100 × ÷ =
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes shows an overall upward trend from 2018 to 2022. It increased significantly from approximately 280 million in 2018 to nearly 399 million in 2019, followed by a decrease to about 311 million in 2020. Subsequently, it rose sharply again in 2021 to reach around 457 million and slightly increased further in 2022 to approximately 464 million. This indicates a recovery and growth after the dip in 2020.
- Adjusted Revenues
- Adjusted revenues exhibited steady growth throughout the period analyzed. Revenues increased from roughly 1.2 billion in 2018 to 1.4 billion in 2019, then to 1.7 billion in 2020. This upward trajectory continued with revenues reaching about 2.0 billion in 2021 and nearly 2.2 billion in 2022. The trend reflects consistent top-line expansion each year.
- Operating Profit Margin (OPM)
- The operating profit margin displays some volatility. It started at 23.36% in 2018, increased to 28.1% in 2019, then dropped significantly to 18.65% in 2020. This was followed by a recovery to 23.28% in 2021, but the margin declined slightly in 2022 to 21.18%. The fluctuations suggest that despite overall profit growth, efficiency and profitability relative to revenue faced some challenges during this period.
Turnover of Capital (TO)
CoStar Group Inc., TO calculation
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 revenues ÷ Invested capital
= ÷ =
- Adjusted Revenues
- Adjusted revenues have shown a consistent upward trend over the five-year period. Starting from approximately 1.2 billion US dollars in 2018, revenues increased each year, reaching nearly 2.2 billion US dollars by the end of 2022. This represents a compound growth trend indicating strong and steady sales growth.
- Invested Capital
- Invested capital has also increased significantly during the same timeframe. It began at about 3.3 billion US dollars in 2018 and climbed steadily to exceed 8.1 billion US dollars by 2022. Notably, there was a substantial jump between 2019 and 2020, nearly doubling invested capital, suggesting major investments or acquisitions during that period.
- Turnover of Capital (TO)
- The turnover of capital ratio, measuring efficiency in using capital to generate revenues, displayed a downward trend overall. Starting at 0.36 in 2018, the ratio slightly improved to 0.38 in 2019 but then declined to 0.25 by 2020. It showed a minor recovery to approximately 0.28 in 2021 before slightly decreasing again to 0.27 in 2022. This indicates decreasing efficiency or increased capital intensity relative to revenues over time.
- Summary of Trends and Insights
- The data reflect a company experiencing robust revenue growth alongside substantial increases in invested capital. However, capital turnover has weakened, indicating that while investments have grown, the returns per unit of invested capital have diminished somewhat. This suggests the possibility of expansion initiatives or asset-heavy investments that have yet to fully translate into proportional revenue increases. Monitoring capital efficiency going forward will be critical to assess the effectiveness of these investments.
Effective Cash Tax Rate (CTR)
CoStar Group Inc., CTR calculation
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 × ÷ =
- Cash Operating Taxes
- The cash operating taxes exhibit a consistent upward trend from 2018 through 2022. Starting at $39,802 thousand in 2018, the figure increased notably each year, reaching $142,190 thousand in 2022. This indicates an increasing tax expense associated with the company's operations over the observed periods.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT values show some fluctuations across the years. Beginning at $280,205 thousand in 2018, it rose to $398,749 thousand in 2019. However, there was a decline in 2020, with the NOPBT dropping to $310,647 thousand. This was followed by a recovery and growth to $457,109 thousand in 2021, then a slight increase to $463,685 thousand in 2022. The overall pattern suggests variability in operational profitability but an upward trend when comparing the start and end of the period.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate shows a steady increase over the five years. It started relatively low at 14.2% in 2018 and gradually rose annually, reaching 30.67% in 2022. This upward trajectory implies that the proportion of taxes paid relative to pre-tax operating profits has increased substantially, possibly due to changes in tax regulations, profitability composition, or strategic tax planning.
- Overall Insights
- The financial data reveal a growing tax burden alongside variable but generally increasing operational profitability. The rising cash operating taxes and effective cash tax rate suggest intensified tax impacts on earnings. Despite fluctuations in NOPBT, the company achieved higher pre-tax operating profits towards the end of the period, which, combined with an increasing tax rate, resulted in a considerable rise in cash tax payments.