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)
Fortinet 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 | 1,822,720) | 1,371,124) | 966,259) | 773,545) | 554,165) | |
| Invested capital2 | 4,282,000) | 3,286,100) | 2,218,800) | 2,227,800) | 1,886,300) | |
| Performance Ratio | ||||||
| ROIC3 | 42.57% | 41.72% | 43.55% | 34.72% | 29.38% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Accenture PLC | 23.93% | 25.83% | — | — | — | |
| Adobe Inc. | 26.93% | 29.44% | 21.67% | — | — | |
| AppLovin Corp. | -3.27% | 0.83% | — | — | — | |
| Cadence Design Systems Inc. | 23.98% | 24.26% | — | — | — | |
| Datadog Inc. | 8.75% | 16.66% | — | — | — | |
| International Business Machines Corp. | -0.61% | 3.86% | — | — | — | |
| Intuit Inc. | 9.30% | 17.64% | — | — | — | |
| Microsoft Corp. | 36.59% | 45.56% | — | — | — | |
| Oracle Corp. | 9.70% | 17.55% | — | — | — | |
| Palantir Technologies Inc. | -7.21% | -14.60% | — | — | — | |
| Palo Alto Networks Inc. | 19.73% | 11.48% | — | — | — | |
| Salesforce Inc. | 5.42% | 8.25% | — | — | — | |
| ServiceNow Inc. | 17.69% | 18.88% | — | — | — | |
| Synopsys Inc. | 17.54% | 11.52% | 11.63% | — | — | |
| Workday Inc. | 6.56% | 1.38% | — | — | — | |
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 × 1,822,720 ÷ 4,282,000 = 42.57%
4 Click competitor name to see calculations.
An analysis of the return on invested capital (ROIC) from 2018 to 2022 reveals a period of significant operational expansion and enhanced capital efficiency. The company demonstrated a consistent ability to grow its net operating profit after taxes (NOPAT) while scaling its invested capital base, resulting in a substantial overall increase in ROIC over the five-year period.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trajectory is observed, with NOPAT increasing from 554,165 thousand US$ in 2018 to 1,822,720 thousand US$ by 2022. This growth indicates a sustained improvement in the company's core operational profitability.
- Invested Capital
- Invested capital grew from 1,886,300 thousand US$ in 2018 to 4,282,000 thousand US$ in 2022. The expansion was relatively moderate between 2018 and 2020, followed by a more aggressive increase in capital deployment during 2021 and 2022.
- Return on Invested Capital (ROIC)
- ROIC rose sharply from 29.38% in 2018 to a peak of 43.55% in 2020. Despite the subsequent rapid increase in the invested capital base, the ROIC remained stable and high, finishing at 42.57% in 2022. This pattern suggests that the additional capital investments were scaled efficiently, allowing the company to maintain high returns on its deployed assets.
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Decomposition of ROIC
Fortinet 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 a significant upward trajectory between 2018 and 2022, rising from 29.38% to 42.57%. The most substantial expansion occurred between 2019 and 2020, after which the metric stabilized within the 41% to 43% range.
- Operating Profit Margin (OPM)
- A consistent and linear increase in operating profit margin is observed, growing from 26.72% in 2018 to 37.11% in 2022. This sustained improvement in profitability suggests enhanced operational efficiency and serves as the primary driver behind the growth in ROIC over the five-year period.
- Turnover of Capital (TO)
- The capital turnover ratio improved from 1.14 in 2018 to 1.31 in 2022. While a peak was observed in 2020 at 1.39 followed by slight fluctuations, the overall trend indicates a more efficient utilization of invested capital to generate revenue compared to the 2018-2019 baseline.
- Effective Cash Tax Rate Impact (1 - CTR)
- The after-tax multiplier (1 minus the effective cash tax rate) followed a general downward trend from a peak of 98.24% in 2019 to 87.63% in 2022. This decline reflects an increasing effective cash tax burden, which acted as a drag on the ROIC, partially offsetting the positive contributions from margin expansion and capital turnover.
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Operating Profit Margin (OPM)
Fortinet 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 | 1,822,720) | 1,371,124) | 966,259) | 773,545) | 554,165) | |
| Add: Cash operating taxes2 | 257,229) | 108,979) | 56,940) | 13,846) | 20,735) | |
| Net operating profit before taxes (NOPBT) | 2,079,950) | 1,480,103) | 1,023,199) | 787,391) | 574,900) | |
| Revenue | 4,417,400) | 3,342,200) | 2,594,400) | 2,156,200) | 1,801,200) | |
| Add: Increase (decrease) in deferred revenue | 1,187,400) | 847,600) | 496,200) | 449,100) | 350,500) | |
| Adjusted revenue | 5,604,800) | 4,189,800) | 3,090,600) | 2,605,300) | 2,151,700) | |
| Profitability Ratio | ||||||
| OPM3 | 37.11% | 35.33% | 33.11% | 30.22% | 26.72% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Accenture PLC | 15.48% | 16.65% | — | — | — | |
| Adobe Inc. | 36.56% | 40.89% | 34.42% | — | — | |
| AppLovin Corp. | -1.60% | 5.23% | — | — | — | |
| Cadence Design Systems Inc. | 32.28% | 28.51% | — | — | — | |
| Datadog Inc. | 6.57% | 13.48% | — | — | — | |
| International Business Machines Corp. | 3.11% | 11.04% | — | — | — | |
| Intuit Inc. | 21.00% | 28.02% | — | — | — | |
| Microsoft Corp. | 43.28% | 43.49% | — | — | — | |
| Oracle Corp. | 24.11% | 40.03% | — | — | — | |
| Palantir Technologies Inc. | -8.42% | -23.57% | — | — | — | |
| Palo Alto Networks Inc. | 23.90% | 16.95% | — | — | — | |
| Salesforce Inc. | 16.42% | 20.31% | — | — | — | |
| ServiceNow Inc. | 14.87% | 17.20% | — | — | — | |
| Synopsys Inc. | 27.91% | 22.47% | 22.28% | — | — | |
| Workday Inc. | 8.82% | 2.23% | — | — | — | |
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 × 2,079,950 ÷ 5,604,800 = 37.11%
4 Click competitor name to see calculations.
A consistent upward trajectory is observed in both top-line revenue and operating profitability from 2018 through 2022. Net operating profit before taxes (NOPBT) experienced significant growth, rising from 574,900 thousand USD to 2,079,950 thousand USD, indicating a substantial expansion in the capacity to generate profit from core operations.
- Revenue Performance
- Adjusted revenue increased steadily over the five-year period, growing from 2,151,700 thousand USD in 2018 to 5,604,800 thousand USD in 2022. This trend reflects a sustained increase in market scale and operational volume.
- Operating Profit Margin (OPM) Expansion
- The operating profit margin demonstrated continuous year-over-year improvement, starting at 26.72% in 2018 and ascending to 37.11% by the end of 2022. This expansion of approximately 1,039 basis points signifies enhanced operational efficiency and a successful optimization of operating expenses relative to revenue growth.
- Operational Efficiency and Scalability
- The simultaneous increase in both absolute NOPBT and the OPM percentage suggests the realization of positive operating leverage. Because the operating profit grew at a faster rate than adjusted revenue, the company successfully increased its profitability per unit of revenue generated.
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Turnover of Capital (TO)
Fortinet 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 | 4,417,400) | 3,342,200) | 2,594,400) | 2,156,200) | 1,801,200) | |
| Add: Increase (decrease) in deferred revenue | 1,187,400) | 847,600) | 496,200) | 449,100) | 350,500) | |
| Adjusted revenue | 5,604,800) | 4,189,800) | 3,090,600) | 2,605,300) | 2,151,700) | |
| Invested capital1 | 4,282,000) | 3,286,100) | 2,218,800) | 2,227,800) | 1,886,300) | |
| Efficiency Ratio | ||||||
| TO2 | 1.31 | 1.28 | 1.39 | 1.17 | 1.14 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Accenture PLC | 2.08 | 1.95 | — | — | — | |
| Adobe Inc. | 0.86 | 0.80 | 0.70 | — | — | |
| AppLovin Corp. | 0.53 | 0.50 | — | — | — | |
| Cadence Design Systems Inc. | 1.00 | 0.98 | — | — | — | |
| Datadog Inc. | 1.45 | 1.26 | — | — | — | |
| International Business Machines Corp. | 0.58 | 0.53 | — | — | — | |
| Intuit Inc. | 0.52 | 0.79 | — | — | — | |
| Microsoft Corp. | 1.04 | 1.20 | — | — | — | |
| Oracle Corp. | 0.54 | 0.51 | — | — | — | |
| Palantir Technologies Inc. | 0.60 | 0.61 | — | — | — | |
| Palo Alto Networks Inc. | 0.86 | 0.74 | — | — | — | |
| Salesforce Inc. | 0.36 | 0.44 | — | — | — | |
| ServiceNow Inc. | 1.24 | 1.16 | — | — | — | |
| Synopsys Inc. | 0.71 | 0.63 | 0.58 | — | — | |
| Workday Inc. | 0.74 | 0.77 | — | — | — | |
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
= 5,604,800 ÷ 4,282,000 = 1.31
3 Click competitor name to see calculations.
An analysis of capital efficiency from 2018 to 2022 reveals a consistent expansion in revenue scale accompanied by a strategic increase in invested capital. The relationship between these two variables indicates a general improvement in the capacity to generate sales from the capital base over the five-year period, despite some volatility in efficiency ratios.
- Adjusted Revenue Trends
- Revenue demonstrated a strong and accelerating upward trajectory, increasing from 2,151,700 thousand US$ in 2018 to 5,604,800 thousand US$ by 2022. This growth was particularly pronounced between 2020 and 2022, indicating a significant scaling of operations.
- Invested Capital Evolution
- Invested capital grew from 1,886,300 thousand US$ in 2018 to 4,282,000 thousand US$ in 2022. A period of relative stability is observed between 2019 and 2020, followed by a substantial increase in 2021, where capital grew by approximately 48% to support the expanding revenue base.
- Turnover of Capital (TO) Analysis
- The turnover ratio exhibited a fluctuating but generally positive trend, rising from 1.14 in 2018 to 1.31 in 2022. A peak of 1.39 was reached in 2020, driven by the combination of revenue growth and stagnant invested capital. The subsequent decline to 1.28 in 2021 reflects a period where the expansion of invested capital outpaced revenue growth. A recovery to 1.31 in 2022 suggests a stabilization of capital productivity as revenue growth continued to accelerate.
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Effective Cash Tax Rate (CTR)
Fortinet 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 | 1,822,720) | 1,371,124) | 966,259) | 773,545) | 554,165) | |
| Add: Cash operating taxes2 | 257,229) | 108,979) | 56,940) | 13,846) | 20,735) | |
| Net operating profit before taxes (NOPBT) | 2,079,950) | 1,480,103) | 1,023,199) | 787,391) | 574,900) | |
| Tax Rate | ||||||
| CTR3 | 12.37% | 7.36% | 5.56% | 1.76% | 3.61% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Accenture PLC | 25.55% | 20.47% | — | — | — | |
| Adobe Inc. | 14.22% | 10.28% | 9.63% | — | — | |
| AppLovin Corp. | — | 68.18% | — | — | — | |
| Cadence Design Systems Inc. | 25.88% | 13.59% | — | — | — | |
| Datadog Inc. | 7.98% | 1.83% | — | — | — | |
| International Business Machines Corp. | 133.97% | 33.45% | — | — | — | |
| Intuit Inc. | 14.74% | 20.15% | — | — | — | |
| Microsoft Corp. | 18.98% | 13.05% | — | — | — | |
| Oracle Corp. | 26.20% | 13.28% | — | — | — | |
| Palantir Technologies Inc. | — | — | — | — | — | |
| Palo Alto Networks Inc. | 3.82% | 8.83% | — | — | — | |
| Salesforce Inc. | 8.32% | 6.83% | — | — | — | |
| ServiceNow Inc. | 4.41% | 5.03% | — | — | — | |
| Synopsys Inc. | 11.45% | 18.39% | 10.36% | — | — | |
| Workday Inc. | -0.77% | 19.25% | — | — | — | |
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 × 257,229 ÷ 2,079,950 = 12.37%
4 Click competitor name to see calculations.
An analysis of the financial performance from 2018 to 2022 reveals a period of consistent operational growth accompanied by a progressively increasing cash tax burden. While net operating profit grew steadily, cash taxes paid expanded at a significantly higher rate, resulting in a rising effective cash tax rate over the period.
- Net Operating Profit Before Taxes (NOPBT)
- A consistent upward trajectory is observed in NOPBT, which rose from 574.9 million US$ in 2018 to 2.08 billion US$ in 2022. This represents a sustained expansion of operational profitability, with profit more than tripling over the five-year window.
- Cash Operating Taxes
- Cash tax payments exhibited a sharp acceleration after a brief decline in 2019. From a low of 13.8 million US$ in 2019, payments increased to 257.2 million US$ by 2022. The growth in cash taxes significantly outpaced the growth in operating profit, reflecting an intensified cash outflow for tax obligations.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate demonstrates a clear ascending trend following 2019. After reaching a minimum of 1.76% in 2019, the rate climbed steadily to 5.56% in 2020, 7.36% in 2021, and finally 12.37% in 2022. This progression indicates that a larger percentage of operating profit is being utilized to cover cash tax liabilities, suggesting a diminishing impact of tax deferrals or a shift in the applicable tax environment.
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