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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- Cash Flow Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Present Value of Free Cash Flow to Equity (FCFE)
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Analysis of Revenues
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Return on Invested Capital (ROIC)
Illumina Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2020 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a generally increasing trend from 2016 to 2019, rising from 453 million US dollars in 2016 to a peak of 957 million US dollars in 2019. However, there was a noticeable decline in 2020, with NOPAT falling to 593 million US dollars. This suggests that profitability increased steadily over the initial four years but experienced a significant downturn in the most recent year.
- Invested Capital
- Invested capital displayed a consistent upward trend from 2016 through 2019, starting at 2,874 million US dollars in 2016 and reaching 4,997 million US dollars in 2019. In 2020, invested capital slightly decreased to 4,907 million US dollars, indicating a minor reduction after years of growth.
- Return on Invested Capital (ROIC)
- ROIC improved significantly from 15.77% in 2016 to a peak of 20.55% in 2017, and then maintained relatively high levels in 2018 (19.42%) and 2019 (19.15%). In 2020, there was a substantial decline to 12.08%, reflecting reduced efficiency in generating returns from invested capital during that year.
- Overall Observations
- The data indicates a phase of growth and increased profitability from 2016 to 2019, with rising NOPAT, invested capital, and ROIC. This period suggests effective capital deployment and operational efficiency. However, 2020 marks a turnaround, with all three indicators showing declines. The drop in NOPAT and ROIC, despite only a minor reduction in invested capital, may point to operational challenges or external factors impacting profitability and capital returns in 2020.
Decomposition of ROIC
Illumina Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2020 | = | × | × | ||||
| Dec 29, 2019 | = | × | × | ||||
| Dec 30, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × | ||||
| Dec 31, 2016 | = | × | × |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
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 showed significant fluctuation over the period. It increased substantially from 24.75% in 2016 to a peak of 39.36% in 2017. Following this peak, it declined to 27.22% in 2018, then exhibited a slight recovery to 30.23% in 2019, before dropping considerably to 19.37% in 2020. This trend indicates variability in operational efficiency and profitability across the years.
- Turnover of Capital (TO)
- The turnover of capital gradually decreased over the review period, moving from 0.83 in 2016 down to 0.66 in 2020. This decline suggests that the company experienced reduced operational efficiency in generating revenue from its capital base, indicating possible challenges in asset utilization or revenue generation relative to invested capital.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate increased steadily throughout the period. Starting at 76.35% in 2016, it dropped moderately in 2017 to 68.24%, then rose sharply in subsequent years to reach 94.45% by 2020. The general upward trend suggests an increasing tax burden or changes in tax strategies and policies affecting cash taxes paid relative to profits.
- Return on Invested Capital (ROIC)
- Return on invested capital initially improved from 15.77% in 2016 to a high of 20.55% in 2017, but experienced a gradual decline thereafter. It decreased to 19.42% in 2018 and remained relatively stable at 19.15% in 2019 before dropping markedly to 12.08% in 2020. This pattern reflects a weakening in the company’s ability to generate returns from its invested capital in the most recent year.
- Overall Insights
- The financial indicators reveal a mixed performance trend. The peak in profitability and returns around 2017 was followed by downward trends in the following years, especially pronounced in 2020. The decline in both operating profit margin and return on invested capital, accompanied by decreased capital turnover and increased effective cash tax rate, suggests operational and financial challenges. These may include reduced efficiency in asset utilization, increased tax expenses, and pressures on profit margins, indicating an area of concern for future performance improvement efforts.
Operating Profit Margin (OPM)
Illumina Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenue | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2020 Calculation
OPM = 100 × NOPBT ÷ Revenue
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibited an overall upward trend from 2016 to 2019, increasing from 594 million US dollars in 2016 to a peak of 1,083 million US dollars in 2017. However, it declined in 2018 to 907 million US dollars, then rose again to 1,071 million US dollars in 2019, followed by a significant decrease to 627 million US dollars in 2020. This pattern indicates volatility in profitability, with the largest drop observed in the latest year.
- Revenue
- Revenue showed consistent growth from 2016 through 2019, rising steadily from 2,398 million US dollars in 2016 to 3,543 million US dollars in 2019. In 2020, revenue decreased to 3,239 million US dollars, marking the first decline in the period analyzed. Despite this drop, the 2020 revenue remained considerably higher than the 2016 base, reflecting longer-term growth.
- Operating Profit Margin (OPM)
- The operating profit margin followed a fluctuating pattern over the five years. It rose sharply from 24.75% in 2016 to a high of 39.36% in 2017, indicating improved operational efficiency or profitability in that year. Subsequently, it decreased to 27.22% in 2018, then slightly increased to 30.23% in 2019. In 2020, the margin dropped markedly to 19.37%, suggesting reduced profitability relative to revenue in that year.
- Summary of Trends and Insights
- Overall, the data reveals periods of growth and decline in profitability metrics, juxtaposed with general revenue growth until 2020. The decline in both net operating profit before taxes and operating profit margin in 2020, alongside reduced revenue, may reflect external challenges or operational stresses impacting financial performance. The initial years showed strong improvement in profitability margin and net operating profit, but the volatility from 2018 onward indicates possible fluctuations in cost management or market conditions affecting returns relative to revenue.
Turnover of Capital (TO)
Illumina Inc., TO calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 Invested capital. See details »
2 2020 Calculation
TO = Revenue ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Revenue Trends
- Revenue increased steadily from 2016 to 2019, starting at 2,398 million US dollars and reaching a peak of 3,543 million US dollars. In 2020, however, revenue decreased to 3,239 million US dollars, indicating a decline after several years of growth.
- Invested Capital Trends
- Invested capital showed a consistent upward trend from 2016 through 2019, rising from 2,874 million US dollars to 4,997 million US dollars. In 2020, invested capital slightly decreased to 4,907 million US dollars, marking a minor reduction after a four-year increase.
- Turnover of Capital (TO) Trends
- The turnover of capital, representing revenue generated per unit of invested capital, declined overall during the period analyzed. It started at 0.83 in 2016, fluctuated slightly in subsequent years, and dropped steadily to 0.66 by 2020. This suggests diminishing efficiency in the use of invested capital to generate revenue.
- Overall Insights
- While both revenue and invested capital generally increased from 2016 to 2019, the efficiency of capital usage deteriorated, as evidenced by the declining turnover of capital ratio. The revenue decline in 2020 paired with a slight decrease in invested capital indicates potential challenges impacting growth and operational efficiency during that year.
Effective Cash Tax Rate (CTR)
Illumina Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2020 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes Trend
- The cash operating taxes exhibit a fluctuating downward trend over the period. Starting at 140 million US dollars in 2016, the amount peaks at 344 million in 2017, then sharply declines in subsequent years to 35 million in 2020. This suggests a reduction in actual cash paid for taxes despite some variability.
- Net Operating Profit Before Taxes (NOPBT) Trend
- Net operating profit before taxes displays a generally volatile pattern. There is a significant increase from 594 million USD in 2016 to 1083 million USD in 2017. Following this peak, profit decreases to 907 million in 2018 but then rises again to 1071 million in 2019 before dropping markedly to 627 million in 2020. This indicates an irregular profit performance with a notable decline in the final year.
- Effective Cash Tax Rate (CTR) Trend
- The effective cash tax rate shows a consistent downward trajectory during the entire period. Beginning at 23.65% in 2016, the rate increases slightly to 31.76% in 2017 but then declines steadily, reaching a low of 5.55% in 2020. This indicates a significant decrease in tax expense as a percentage of net operating profits, suggesting enhanced tax efficiency or changes in tax obligations.
- Combined Insights
- The data reveals that despite fluctuating net operating profits before taxes, the cash operating taxes paid have substantially decreased, correlating with a marked reduction in the effective cash tax rate. This divergence suggests possible strategic tax planning or altered tax circumstances that have enabled the company to reduce its cash tax liabilities over the analyzed period. The sharp drop in both net profits and cash operating taxes in 2020 is particularly notable, reflecting a year of operational and fiscal challenges.