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)
Microchip Technology Inc., ROIC calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net operating profit after taxes (NOPAT)1 | 1,620,172) | 488,868) | 455,414) | 695,844) | 428,761) | 180,568) | |
| Invested capital2 | 11,963,600) | 12,643,700) | 13,725,600) | 14,715,398) | 5,149,468) | 6,087,016) | |
| Performance Ratio | |||||||
| ROIC3 | 13.54% | 3.87% | 3.32% | 4.73% | 8.33% | 2.97% | |
| Benchmarks | |||||||
| ROIC, Competitors4 | |||||||
| Advanced Micro Devices Inc. | -0.24% | 56.77% | — | — | — | — | |
| Analog Devices Inc. | 5.76% | 2.37% | 6.95% | — | — | — | |
| Applied Materials Inc. | 46.34% | 41.96% | 29.68% | — | — | — | |
| Broadcom Inc. | 20.75% | 10.98% | 4.78% | — | — | — | |
| Intel Corp. | 4.14% | 22.03% | — | — | — | — | |
| KLA Corp. | 42.51% | 31.64% | — | — | — | — | |
| Lam Research Corp. | 41.68% | 37.13% | — | — | — | — | |
| Marvell Technology Inc. | -1.91% | -2.75% | — | — | — | — | |
| Micron Technology Inc. | 17.39% | 13.01% | — | — | — | — | |
| NVIDIA Corp. | 53.12% | 33.44% | — | — | — | — | |
| Qualcomm Inc. | 45.12% | 42.56% | 27.48% | — | — | — | |
| Texas Instruments Inc. | 49.74% | 48.28% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 1,620,172 ÷ 11,963,600 = 13.54%
4 Click competitor name to see calculations.
The analysis of the return on invested capital (ROIC) from March 31, 2017, to March 31, 2022, reveals a period characterized by a significant expansion of the capital base followed by a substantial surge in operational profitability.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT demonstrated an overall growth trajectory with a period of volatility. Profits rose from 180.6 million US dollars in 2017 to 695.8 million US dollars in 2019, before experiencing a decline to 455.4 million US dollars in 2020. A significant acceleration occurred in the final year of the period, with NOPAT reaching 1.62 billion US dollars by March 31, 2022, marking a substantial increase in earnings generation.
- Invested Capital Fluctuations
- The invested capital profile shifted dramatically in 2019, jumping from 5.15 billion US dollars in 2018 to 14.72 billion US dollars. This indicates a period of major capital deployment. Subsequent years showed a steady contraction of the invested capital base, which declined incrementally to 11.96 billion US dollars by March 31, 2022.
- ROIC Efficiency and Correlation
- The ROIC exhibited high volatility, closely mirroring the relationship between profit growth and capital investment. An early peak of 8.33% in 2018 was followed by a sharp decline to 4.73% in 2019, a direct result of the massive increase in invested capital. The ratio remained depressed between 2020 and 2021, hitting a low of 3.32%. However, the combination of surging NOPAT and a reduced capital base led to a peak ROIC of 13.54% in 2022, representing the highest level of capital efficiency within the analyzed timeframe.
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Decomposition of ROIC
Microchip Technology Inc., decomposition of ROIC
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
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 significant volatility between 2017 and 2022, characterized by a mid-period slump and a sharp recovery in the final year. After an initial increase to 8.33% in 2018, ROIC declined and remained suppressed between 3.32% and 4.73% from 2019 to 2021, before reaching a peak of 13.54% in 2022.
- Operating Profit Margin (OPM)
- The operating profit margin acted as a primary driver of ROIC fluctuations. A substantial increase was noted in 2018 (23.14%) and 2022 (26.87%), representing the two strongest performance years. Between 2019 and 2021, margins remained relatively compressed, fluctuating between 11.96% and 13.34%, which contributed to the diminished returns during this period.
- Turnover of Capital (TO)
- Capital efficiency showed a marked decline following 2018, where the turnover ratio peaked at 0.77. A significant contraction occurred in 2019, with the ratio dropping to 0.36. From 2020 through 2022, a gradual recovery trend is observed, with the ratio climbing steadily to 0.58 by the end of the period, indicating improved asset utilization.
- Effective Cash Tax Rate Impact
- The factor representing 1 minus the effective cash tax rate displayed high instability. The lowest value occurred in 2018 (46.54%), indicating a higher tax burden that partially offset the gains from strong margins and capital turnover. Conversely, a peak in 2019 (97.53%) suggests a minimal tax impact that year, though this was insufficient to counteract the sharp declines in operating margin and capital turnover.
The surge in ROIC observed in 2022 is attributable to the simultaneous optimization of multiple components. The combination of the highest recorded operating profit margin (26.87%), a recovering capital turnover ratio (0.58), and a favorable tax position (86.89%) culminated in a significant expansion of overall capital returns.
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Operating Profit Margin (OPM)
Microchip Technology Inc., OPM calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net operating profit after taxes (NOPAT)1 | 1,620,172) | 488,868) | 455,414) | 695,844) | 428,761) | 180,568) | |
| Add: Cash operating taxes2 | 244,410) | 205,150) | 175,290) | 17,593) | 492,538) | 98,396) | |
| Net operating profit before taxes (NOPBT) | 1,864,582) | 694,017) | 630,703) | 713,437) | 921,299) | 278,964) | |
| Net sales | 6,820,900) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) | |
| Add: Increase (decrease) in deferred revenue | 117,600) | —) | —) | —) | —) | —) | |
| Adjusted net sales | 6,938,500) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) | |
| Profitability Ratio | |||||||
| OPM3 | 26.87% | 12.76% | 11.96% | 13.34% | 23.14% | 8.19% | |
| Benchmarks | |||||||
| OPM, Competitors4 | |||||||
| Advanced Micro Devices Inc. | 5.31% | 22.70% | — | — | — | — | |
| Analog Devices Inc. | 27.59% | 20.52% | 26.98% | — | — | — | |
| Applied Materials Inc. | 30.32% | 30.54% | 25.67% | — | — | — | |
| Broadcom Inc. | 42.94% | 30.96% | 17.06% | — | — | — | |
| Intel Corp. | 13.58% | 28.05% | — | — | — | — | |
| KLA Corp. | 41.73% | 36.39% | — | — | — | — | |
| Lam Research Corp. | 35.59% | 34.25% | — | — | — | — | |
| Marvell Technology Inc. | -7.16% | -8.08% | — | — | — | — | |
| Micron Technology Inc. | 31.43% | 23.10% | — | — | — | — | |
| NVIDIA Corp. | 37.99% | 28.45% | — | — | — | — | |
| Qualcomm Inc. | 35.06% | 30.10% | 24.17% | — | — | — | |
| Texas Instruments Inc. | 51.22% | 49.60% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Adjusted net sales
= 100 × 1,864,582 ÷ 6,938,500 = 26.87%
4 Click competitor name to see calculations.
The financial performance over the analyzed six-year period is characterized by a steady expansion in top-line revenue accompanied by significant volatility in operating profitability. While revenue growth remained generally consistent, the conversion of these sales into operating profit fluctuated sharply, indicating varying levels of operational efficiency and cost management over time.
- Adjusted Net Sales Trends
- A sustained upward trajectory in revenue is observed, with adjusted net sales growing from 3,407,807 thousand US$ in 2017 to 6,938,500 thousand US$ by 2022. This growth was most pronounced between 2018 and 2019, followed by a period of relative stabilization between 2019 and 2021 before another significant increase in 2022.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT exhibited high volatility, rising from 278,964 thousand US$ in 2017 to a peak of 1,864,582 thousand US$ in 2022. A sharp increase was recorded in 2018, followed by a downward trend that lasted until 2020, where NOPBT dipped to 630,703 thousand US$. A strong recovery began in 2021, leading to a substantial surge in profitability by the end of the period.
- Operating Profit Margin (OPM) Analysis
- The operating profit margin demonstrated significant instability. Starting at 8.19% in 2017, the OPM surged to 23.14% in 2018 before experiencing a period of compression, reaching a low of 11.96% in 2020. This contraction suggests that operating expenses grew faster than revenue during the 2019-2020 window. However, a strong rebound occurred in 2022, with the OPM reaching a period high of 26.87%, signaling a marked improvement in operational leverage and cost control.
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Turnover of Capital (TO)
Microchip Technology Inc., TO calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net sales | 6,820,900) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) | |
| Add: Increase (decrease) in deferred revenue | 117,600) | —) | —) | —) | —) | —) | |
| Adjusted net sales | 6,938,500) | 5,438,400) | 5,274,200) | 5,349,500) | 3,980,800) | 3,407,807) | |
| Invested capital1 | 11,963,600) | 12,643,700) | 13,725,600) | 14,715,398) | 5,149,468) | 6,087,016) | |
| Efficiency Ratio | |||||||
| TO2 | 0.58 | 0.43 | 0.38 | 0.36 | 0.77 | 0.56 | |
| Benchmarks | |||||||
| TO, Competitors3 | |||||||
| Advanced Micro Devices Inc. | 0.40 | 2.65 | — | — | — | — | |
| Analog Devices Inc. | 0.27 | 0.16 | 0.31 | — | — | — | |
| Applied Materials Inc. | 1.73 | 1.57 | 1.31 | — | — | — | |
| Broadcom Inc. | 0.53 | 0.42 | 0.36 | — | — | — | |
| Intel Corp. | 0.71 | 0.89 | — | — | — | — | |
| KLA Corp. | 1.18 | 1.01 | — | — | — | — | |
| Lam Research Corp. | 1.35 | 1.24 | — | — | — | — | |
| Marvell Technology Inc. | 0.22 | 0.33 | — | — | — | — | |
| Micron Technology Inc. | 0.59 | 0.61 | — | — | — | — | |
| NVIDIA Corp. | 1.49 | 1.28 | — | — | — | — | |
| Qualcomm Inc. | 1.50 | 1.66 | 1.33 | — | — | — | |
| Texas Instruments Inc. | 1.14 | 1.12 | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 Invested capital. See details »
2 2022 Calculation
TO = Adjusted net sales ÷ Invested capital
= 6,938,500 ÷ 11,963,600 = 0.58
3 Click competitor name to see calculations.
The analysis of capital efficiency from 2017 to 2022 reveals a period of significant structural change in the capital base, followed by a steady recovery in asset productivity. While adjusted net sales demonstrated a consistent long-term upward trajectory, the turnover of capital experienced substantial volatility due to a sharp increase in invested capital during the 2019 fiscal year.
- Adjusted Net Sales Performance
- Revenue grew from 3.41 billion USD in 2017 to 6.94 billion USD in 2022. A notable acceleration occurred between 2018 and 2019, where sales increased by approximately 34%, and again between 2021 and 2022, where sales rose by roughly 27%.
- Invested Capital Dynamics
- Invested capital remained relatively stable until 2019, when it spiked from 5.15 billion USD to 14.72 billion USD. Following this peak, a consistent downward trend was observed, with invested capital decreasing annually to reach 11.96 billion USD by March 31, 2022.
- Turnover of Capital (TO) Trends
- The capital turnover ratio peaked in 2018 at 0.77, indicating high efficiency in generating sales relative to invested capital. This ratio dropped sharply to 0.36 in 2019, directly correlating with the massive expansion of the capital base. From 2019 onward, a recovery phase is evident, with the ratio improving steadily each year to reach 0.58 by 2022.
The observed patterns suggest that the company underwent a significant capital expansion in 2019 which initially diluted capital efficiency. However, the subsequent combination of increasing net sales and a disciplined reduction in invested capital has led to a progressive restoration of the turnover ratio, indicating improved operational efficiency in the latter part of the analyzed period.
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Effective Cash Tax Rate (CTR)
Microchip Technology Inc., CTR calculation, comparison to benchmarks
| Mar 31, 2022 | Mar 31, 2021 | Mar 31, 2020 | Mar 31, 2019 | Mar 31, 2018 | Mar 31, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net operating profit after taxes (NOPAT)1 | 1,620,172) | 488,868) | 455,414) | 695,844) | 428,761) | 180,568) | |
| Add: Cash operating taxes2 | 244,410) | 205,150) | 175,290) | 17,593) | 492,538) | 98,396) | |
| Net operating profit before taxes (NOPBT) | 1,864,582) | 694,017) | 630,703) | 713,437) | 921,299) | 278,964) | |
| Tax Rate | |||||||
| CTR3 | 13.11% | 29.56% | 27.79% | 2.47% | 53.46% | 35.27% | |
| Benchmarks | |||||||
| CTR, Competitors4 | |||||||
| Advanced Micro Devices Inc. | 111.01% | 5.73% | — | — | — | — | |
| Analog Devices Inc. | 21.73% | 25.70% | 16.31% | — | — | — | |
| Applied Materials Inc. | 11.76% | 12.33% | 12.01% | — | — | — | |
| Broadcom Inc. | 9.59% | 16.50% | 22.68% | — | — | — | |
| Intel Corp. | 57.13% | 12.07% | — | — | — | — | |
| KLA Corp. | 13.88% | 14.30% | — | — | — | — | |
| Lam Research Corp. | 13.55% | 12.57% | — | — | — | — | |
| Marvell Technology Inc. | — | — | — | — | — | — | |
| Micron Technology Inc. | 6.35% | 6.93% | — | — | — | — | |
| NVIDIA Corp. | 6.28% | 8.10% | — | — | — | — | |
| Qualcomm Inc. | 14.27% | 14.84% | 14.19% | — | — | — | |
| Texas Instruments Inc. | 14.83% | 12.93% | — | — | — | — | |
Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 244,410 ÷ 1,864,582 = 13.11%
4 Click competitor name to see calculations.
The effective cash tax rate (CTR) exhibits significant volatility between 2017 and 2022, characterized by sharp fluctuations that do not maintain a consistent linear correlation with the Net Operating Profit Before Taxes (NOPBT).
- Initial Peak and Sharp Contraction
- Between 2017 and 2018, a substantial increase in cash operating taxes from 98.4 million to 492.5 million drove the CTR to a peak of 53.46%. This was immediately followed by a precipitous decline in 2019, where cash operating taxes fell to 17.6 million, resulting in a CTR of 2.47% despite NOPBT remaining relatively strong at 713.4 million.
- Intermediate Stabilization
- A period of relative stability occurred between 2020 and 2021. During these two years, the CTR remained within a tight range of 27.79% to 29.56%, as cash tax payments and operating profits grew at comparable, moderate rates.
- Profit Expansion and Tax Divergence
- In 2022, a marked divergence is observed between profitability and tax outflows. NOPBT surged to a period high of 1.86 billion, yet cash operating taxes increased only modestly to 244.4 million. This disparity led to a compression of the CTR to 13.11%, indicating that profit growth significantly outpaced the growth of actual cash tax payments.
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