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)
Express Scripts Holding Co., ROIC calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,274,103) | 3,375,341) | 2,290,431) | 1,953,528) | 1,817,712) | |
| Invested capital2 | 37,007,152) | 35,712,343) | 37,411,086) | 38,622,209) | 41,289,230) | |
| Performance Ratio | ||||||
| ROIC3 | 8.85% | 9.45% | 6.12% | 5.06% | 4.40% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2017 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 3,274,103 ÷ 37,007,152 = 8.85%
4 Click competitor name to see calculations.
Between 2013 and 2017, a significant improvement in capital efficiency is observed, characterized by a steady increase in the return on invested capital driven by rising operating profits and a general reduction in the capital base.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a consistent upward trajectory from 2013 through 2016, increasing from 1,817,712 thousand to 3,375,341 thousand. A slight contraction occurred in 2017, with NOPAT decreasing to 3,274,103 thousand, though the value remained substantially higher than the 2013 baseline.
- Invested Capital
- Invested capital showed a general downward trend for the majority of the period, declining from 41,289,230 thousand in 2013 to a low of 35,712,343 thousand in 2016. This trend reversed in 2017, as invested capital rose to 37,007,152 thousand.
- Return on Invested Capital (ROIC)
- The ROIC experienced significant growth, rising from 4.40% in 2013 to a peak of 9.45% in 2016. This expansion was the result of the simultaneous increase in NOPAT and the reduction in invested capital. In 2017, the ROIC declined to 8.85%, reflecting the combined impact of lower NOPAT and a higher capital base. Despite the 2017 dip, the overall period reflects a marked improvement in the ability to generate operating returns from invested assets.
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Decomposition of ROIC
Express Scripts Holding Co., decomposition of ROIC
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
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 a significant upward trajectory between 2013 and 2017, increasing from 4.40% to 8.85%. This growth reflects a compound improvement across operational efficiency, asset utilization, and the net effect of cash taxes.
- Operating Profit Margin (OPM)
- A consistent and linear increase in the operating profit margin is observed, rising from 3.56% in 2013 to 5.56% in 2017. This steady expansion indicates an improved ability to convert revenue into operating profit, serving as a primary driver for the overall increase in ROIC.
- Turnover of Capital (TO)
- Capital turnover improved from 2.52 in 2013 to a peak of 2.81 in 2016, before experiencing a slight contraction to 2.70 in 2017. The general trend suggests an increase in the efficiency of capital deployment to generate revenue for the majority of the analyzed period.
- After-Tax Component (1 – Effective Cash Tax Rate)
- The tax multiplier showed volatility but generally trended higher, moving from 49.02% in 2013 to 58.82% in 2017. A notable peak occurred in 2016 at 65.94%, which contributed to the sharp acceleration of ROIC during that specific year.
- Integrated ROIC Decomposition
- The growth in ROIC is the result of synergistic improvements across all three components of the decomposition. While the Operating Profit Margin provided a stable foundation for growth, the peak ROIC of 9.45% in 2016 was specifically amplified by the convergence of the period's highest capital turnover and the most favorable effective cash tax rate.
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Operating Profit Margin (OPM)
Express Scripts Holding Co., OPM calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,274,103) | 3,375,341) | 2,290,431) | 1,953,528) | 1,817,712) | |
| Add: Cash operating taxes2 | 2,292,125) | 1,743,214) | 2,004,540) | 1,669,615) | 1,890,614) | |
| Net operating profit before taxes (NOPBT) | 5,566,228) | 5,118,556) | 4,294,971) | 3,623,144) | 3,708,326) | |
| Revenues | 100,064,600) | 100,287,500) | 101,751,800) | 100,887,100) | 104,098,800) | |
| Profitability Ratio | ||||||
| OPM3 | 5.56% | 5.10% | 4.22% | 3.59% | 3.56% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2017 Calculation
OPM = 100 × NOPBT ÷ Revenues
= 100 × 5,566,228 ÷ 100,064,600 = 5.56%
4 Click competitor name to see calculations.
An analysis of the operational performance from 2013 to 2017 reveals a consistent improvement in profitability and operational efficiency. While top-line growth remained stagnant, the ability to convert revenue into operating profit increased steadily throughout the period.
- Revenue Performance
- Revenues remained relatively flat over the five-year period, oscillating around the $100 billion threshold. A peak of approximately $104.1 billion was recorded in 2013, followed by a slight decline and stabilization, ending at approximately $100.1 billion in 2017. This indicates a lack of significant organic growth in total sales volume or pricing during this timeframe.
- Net Operating Profit Before Taxes (NOPBT)
- Despite the stagnant revenue trend, NOPBT exhibited strong and consistent growth. Profits rose from $3.7 billion in 2013 to $5.6 billion in 2017. The growth was particularly pronounced after 2014, where NOPBT increased annually, suggesting a decoupling of profit growth from revenue growth.
- Operating Profit Margin (OPM)
- The operating profit margin demonstrated a continuous upward trajectory, increasing from 3.56% in 2013 to 5.56% in 2017. This represents a steady expansion of 200 basis points over five years. The consistent rise in margin, occurring alongside flat revenues, points toward successful cost management initiatives, operational efficiencies, or a strategic shift toward higher-margin service offerings.
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Turnover of Capital (TO)
Express Scripts Holding Co., TO calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenues | 100,064,600) | 100,287,500) | 101,751,800) | 100,887,100) | 104,098,800) | |
| Invested capital1 | 37,007,152) | 35,712,343) | 37,411,086) | 38,622,209) | 41,289,230) | |
| Efficiency Ratio | ||||||
| TO2 | 2.70 | 2.81 | 2.72 | 2.61 | 2.52 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Invested capital. See details »
2 2017 Calculation
TO = Revenues ÷ Invested capital
= 100,064,600 ÷ 37,007,152 = 2.70
3 Click competitor name to see calculations.
The analysis of capital efficiency between 2013 and 2017 reveals a period of stagnant revenue growth coupled with a strategic reduction in invested capital, which initially improved the capital turnover ratio.
- Revenue Performance
- Revenues remained relatively flat over the five-year period, starting at US$ 104.1 billion in 2013 and ending at US$ 100.1 billion in 2017. Despite minor fluctuations, including a slight recovery in 2015, there was no sustained growth trajectory observed in the top line.
- Invested Capital Trends
- A consistent downward trend in invested capital was observed from 2013 to 2016, with the balance decreasing from US$ 41.3 billion to US$ 35.7 billion. This contraction was interrupted in 2017, when invested capital increased to US$ 37.0 billion.
- Turnover of Capital (TO)
- The turnover ratio demonstrated a steady progression, increasing from 2.52 in 2013 to a peak of 2.81 in 2016. This upward trend suggests an improvement in the efficiency of revenue generation relative to the capital employed. However, this ratio experienced a reversal in 2017, declining to 2.70.
The improvement in capital turnover through 2016 was primarily driven by the reduction in the invested capital base rather than by revenue expansion. The subsequent decline in the turnover ratio in 2017 is attributable to the combination of stagnant revenue levels and a simultaneous increase in the capital utilized by the organization.
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Effective Cash Tax Rate (CTR)
Express Scripts Holding Co., CTR calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,274,103) | 3,375,341) | 2,290,431) | 1,953,528) | 1,817,712) | |
| Add: Cash operating taxes2 | 2,292,125) | 1,743,214) | 2,004,540) | 1,669,615) | 1,890,614) | |
| Net operating profit before taxes (NOPBT) | 5,566,228) | 5,118,556) | 4,294,971) | 3,623,144) | 3,708,326) | |
| Tax Rate | ||||||
| CTR3 | 41.18% | 34.06% | 46.67% | 46.08% | 50.98% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Abbott Laboratories | — | — | — | — | — | |
| Elevance Health Inc. | — | — | — | — | — | |
| Intuitive Surgical Inc. | — | — | — | — | — | |
| Medtronic PLC | — | — | — | — | — | |
| UnitedHealth Group Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2017 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 2,292,125 ÷ 5,566,228 = 41.18%
4 Click competitor name to see calculations.
The financial performance between 2013 and 2017 is characterized by a steady increase in net operating profit before taxes alongside fluctuating cash tax obligations, resulting in a volatile effective cash tax rate.
- Net Operating Profit Before Taxes (NOPBT)
- A consistent growth trajectory is observed in NOPBT, which increased from 3,708,326 thousand US dollars in 2013 to 5,566,228 thousand US dollars by 2017. This indicates a sustained expansion in operating profitability over the five-year period, with a notable acceleration in growth between 2015 and 2016.
- Cash Operating Taxes
- Cash tax payments exhibited non-linear movement, decreasing in 2014 to 1,669,615 thousand US dollars before climbing to a period high of 2,292,125 thousand US dollars in 2017. The lack of a linear correlation between profit growth and tax payments contributed to the variance in the effective tax rate.
- Effective Cash Tax Rate (CTR)
- The CTR experienced significant volatility, starting at 50.98% in 2013 and reaching a low of 34.06% in 2016. After remaining relatively stable near 46% in 2014 and 2015, the rate declined sharply in 2016 before increasing to 41.18% in 2017. This suggests that the company achieved higher tax efficiency relative to its operating profit in the latter half of the period compared to the initial baseline.
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