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)
DexCom 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 | 352,450) | 233,041) | 294,086) | 150,334) | (115,440) | |
| Invested capital2 | 1,649,000) | 1,899,300) | 1,367,200) | 836,300) | 1,449,197) | |
| Performance Ratio | ||||||
| ROIC3 | 21.37% | 12.27% | 21.51% | 17.98% | -7.97% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Abbott Laboratories | 10.96% | 11.30% | — | — | — | |
| Elevance Health Inc. | 10.24% | 11.26% | — | — | — | |
| Intuitive Surgical Inc. | 22.01% | 37.63% | — | — | — | |
| Medtronic PLC | 7.02% | 5.59% | — | — | — | |
| UnitedHealth Group Inc. | 13.68% | 13.51% | — | — | — | |
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 × 352,450 ÷ 1,649,000 = 21.37%
4 Click competitor name to see calculations.
The financial trajectory between 2018 and 2022 is characterized by a significant transition from negative operational earnings to sustained profitability and a volatile but generally positive return on invested capital. A sharp turnaround occurred following 2018, leading to a period of growth in operating profit, despite fluctuations in the capital base.
- Net Operating Profit After Taxes (NOPAT)
- A substantial recovery is evident, moving from a deficit of US$115.4 million in 2018 to a peak of US$352.5 million in 2022. While a moderate decline was recorded in 2021, the overall trend indicates a strong expansion in the company's ability to generate operating profits.
- Invested Capital
- The capital base exhibited significant volatility throughout the period. Following a sharp contraction in 2019 to US$836.3 million, invested capital grew steadily to a peak of US$1.9 billion in 2021 before decreasing to US$1.65 billion in 2022. This suggests active shifts in asset allocation or financing structures.
- Return on Invested Capital (ROIC)
- ROIC shifted from a negative 7.97% in 2018 to a strong positive range, peaking at 21.51% in 2020. A notable decline to 12.27% occurred in 2021, which coincides with the simultaneous decrease in NOPAT and the peak in invested capital. However, the metric recovered strongly in 2022 to reach 21.37%, demonstrating an improved efficiency in deploying capital to generate returns.
The correlation between the increase in NOPAT and the fluctuations in invested capital explains the volatility in ROIC. The 2022 results indicate a high level of capital efficiency, as the company achieved its highest NOPAT with a reduced capital base compared to the previous year.
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Decomposition of ROIC
DexCom 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 exhibited a significant turnaround between 2018 and 2022, moving from a negative return of -7.97% to 21.37%. This trajectory indicates a transition from initial capital consumption to a phase of robust value generation, characterized by a sharp increase in operational profitability and capital efficiency.
- Operating Profit Margin (OPM)
- A substantial recovery in operational profitability is evident, with the margin shifting from -10.39% in 2018 to a peak of 16.70% in 2020. While a decline to 11.41% was noted in 2021, the margin rebounded to 14.69% by 2022, suggesting an overall improvement in the ability to convert revenue into operating profit.
- Turnover of Capital (TO)
- Capital efficiency improved dramatically in 2019, with the turnover ratio rising from 0.71 to 1.76. Following this surge, the ratio experienced a gradual decline through 2021, reaching 1.29, before recovering strongly to a period-high of 1.77 in 2022. This pattern suggests significant fluctuations in asset utilization relative to revenue growth over the five-year period.
- Effective Cash Tax Rate (CTR) Impact
- The tax multiplier (1 – CTR) shows a steady downward trend from 100% in 2018 to 82.15% in 2022. This decline reflects the transition from a tax-shielded position, characteristic of the initial loss-making period, to a consistent tax burden as the company achieved sustained profitability.
The volatility in the overall return on invested capital, specifically the dip observed in 2021, was driven by a simultaneous contraction in both operating profit margins and capital turnover. The recovery in 2022 was achieved through a dual improvement in operational efficiency and asset utilization, which together offset the downward pressure of an increasing effective tax rate to restore the return to 21.37%.
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Operating Profit Margin (OPM)
DexCom 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 | 352,450) | 233,041) | 294,086) | 150,334) | (115,440) | |
| Add: Cash operating taxes2 | 76,556) | 46,414) | 27,729) | 16,466) | 8,239) | |
| Net operating profit before taxes (NOPBT) | 429,006) | 279,455) | 321,815) | 166,800) | (107,202) | |
| Revenue | 2,909,800) | 2,448,500) | 1,926,700) | 1,476,000) | 1,031,600) | |
| Add: Increase (decrease) in deferred revenue | 10,900) | (100) | 500) | (1,200) | (300) | |
| Adjusted revenue | 2,920,700) | 2,448,400) | 1,927,200) | 1,474,800) | 1,031,300) | |
| Profitability Ratio | ||||||
| OPM3 | 14.69% | 11.41% | 16.70% | 11.31% | -10.39% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Abbott Laboratories | 20.24% | 20.37% | — | — | — | |
| Elevance Health Inc. | 5.64% | 6.58% | — | — | — | |
| Intuitive Surgical Inc. | 26.19% | 33.56% | — | — | — | |
| Medtronic PLC | 19.15% | 16.48% | — | — | — | |
| UnitedHealth Group Inc. | 9.13% | 8.33% | — | — | — | |
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 revenue
= 100 × 429,006 ÷ 2,920,700 = 14.69%
4 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by consistent revenue expansion and a transition from operational losses to sustained profitability. Adjusted revenue grew steadily each year, increasing from approximately 1.03 billion US dollars in 2018 to 2.92 billion US dollars by 2022.
- Operating Profitability Trends
- A significant reversal in operational performance occurred between 2018 and 2019, as Net Operating Profit Before Taxes (NOPBT) shifted from a negative 107.2 million US dollars to a positive 166.8 million US dollars. This turnaround established a baseline for profitability that continued through 2022, despite a moderate contraction in 2021.
- Operating Profit Margin (OPM) Dynamics
- The operating profit margin exhibited notable volatility during the period. After starting at -10.39% in 2018, the margin peaked at 16.70% in 2020. A contraction followed in 2021, where the margin declined to 11.41%, coinciding with a decrease in absolute NOPBT despite rising revenues. However, a recovery was observed in 2022, with the margin climbing back to 14.69%.
- Revenue and Profit Correlation
- While adjusted revenue maintained a linear growth trajectory, NOPBT and OPM did not follow the same consistency. The divergence in 2021 suggests that operating expenses grew at a faster rate than revenue during that specific fiscal year, temporarily compressing the margin before efficiency gains or price adjustments improved the ratio in 2022.
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Turnover of Capital (TO)
DexCom 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) | ||||||
| Revenue | 2,909,800) | 2,448,500) | 1,926,700) | 1,476,000) | 1,031,600) | |
| Add: Increase (decrease) in deferred revenue | 10,900) | (100) | 500) | (1,200) | (300) | |
| Adjusted revenue | 2,920,700) | 2,448,400) | 1,927,200) | 1,474,800) | 1,031,300) | |
| Invested capital1 | 1,649,000) | 1,899,300) | 1,367,200) | 836,300) | 1,449,197) | |
| Efficiency Ratio | ||||||
| TO2 | 1.77 | 1.29 | 1.41 | 1.76 | 0.71 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Abbott Laboratories | 0.71 | 0.69 | — | — | — | |
| Elevance Health Inc. | 2.33 | 2.14 | — | — | — | |
| Intuitive Surgical Inc. | 1.16 | 1.27 | — | — | — | |
| Medtronic PLC | 0.46 | 0.42 | — | — | — | |
| UnitedHealth Group Inc. | 1.95 | 2.04 | — | — | — | |
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 revenue ÷ Invested capital
= 2,920,700 ÷ 1,649,000 = 1.77
3 Click competitor name to see calculations.
Between 2018 and 2022, a consistent upward trajectory in adjusted revenue is observed, while the turnover of capital exhibits significant volatility linked to fluctuations in the invested capital base.
- Revenue Growth Trends
- Adjusted revenue demonstrated uninterrupted year-over-year growth, increasing from 1,031,300 thousand US$ in 2018 to 2,920,700 thousand US$ in 2022. This steady expansion indicates a strong and consistent increase in market scale over the five-year period.
- Invested Capital Volatility
- The invested capital base did not follow a linear path. A significant reduction occurred in 2019, where capital dropped to 836,300 thousand US$. This was followed by a period of expansion peaking in 2021 at 1,899,300 thousand US$, before contracting again to 1,649,000 thousand US$ in 2022.
- Capital Turnover Dynamics
- The turnover of capital ratio shifted from 0.71 in 2018 to 1.77 in 2022. The sharp increase to 1.76 in 2019 was primarily a result of the substantial decrease in invested capital relative to growing revenue. A subsequent decline in the ratio to 1.41 in 2020 and 1.29 in 2021 reflects a phase where the growth of invested capital outpaced the growth of adjusted revenue. The recovery to 1.77 in 2022 represents the highest efficiency level in the period, driven by the simultaneous achievement of peak revenue and a reduction in the capital base.
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Effective Cash Tax Rate (CTR)
DexCom 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 | 352,450) | 233,041) | 294,086) | 150,334) | (115,440) | |
| Add: Cash operating taxes2 | 76,556) | 46,414) | 27,729) | 16,466) | 8,239) | |
| Net operating profit before taxes (NOPBT) | 429,006) | 279,455) | 321,815) | 166,800) | (107,202) | |
| Tax Rate | ||||||
| CTR3 | 17.85% | 16.61% | 8.62% | 9.87% | — | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Abbott Laboratories | 23.97% | 20.05% | — | — | — | |
| Elevance Health Inc. | 22.01% | 20.22% | — | — | — | |
| Intuitive Surgical Inc. | 27.40% | 11.76% | — | — | — | |
| Medtronic PLC | 19.53% | 18.59% | — | — | — | |
| UnitedHealth Group Inc. | 23.25% | 20.32% | — | — | — | |
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 × 76,556 ÷ 429,006 = 17.85%
4 Click competitor name to see calculations.
The financial data reveals a strong correlation between the growth of net operating profit before taxes (NOPBT) and a corresponding increase in cash operating taxes over the five-year period ending December 31, 2022. A transition from an operating loss in 2018 to substantial profitability has fundamentally shifted the company's cash tax profile.
- Net Operating Profit Before Taxes (NOPBT)
- A significant recovery is observed between 2018 and 2019, as the figure moved from a deficit of US$ 107.2 million to a profit of US$ 166.8 million. Despite a slight contraction in 2021, the NOPBT reached a peak of US$ 429.0 million by the end of 2022, indicating a general upward trajectory in operating performance.
- Cash Operating Taxes
- Cash tax outflows exhibited consistent and aggressive growth throughout the analyzed period. Starting at US$ 8.2 million in 2018, these payments increased more than ninefold to reach US$ 76.6 million in 2022, reflecting the impact of increased profitability on actual tax obligations.
- Effective Cash Tax Rate (CTR)
- The CTR was not applicable in 2018 due to the negative NOPBT. Between 2019 and 2020, the rate remained relatively low and stable, fluctuating between 8.62% and 9.87%. A marked upward shift occurred in 2021 and 2022, with the rate climbing to 16.61% and 17.85%, respectively, indicating that a larger proportion of operating profit is being converted into cash tax payments.
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