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)
Monster Beverage Corp., ROIC calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,640,309) | 1,225,215) | 1,381,324) | 1,236,715) | 1,081,692) | |
| Invested capital2 | 7,284,194) | 5,815,467) | 4,854,459) | 4,323,610) | 3,936,622) | |
| Performance Ratio | ||||||
| ROIC3 | 22.52% | 21.07% | 28.45% | 28.60% | 27.48% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Coca-Cola Co. | 13.03% | 12.66% | 13.95% | — | — | |
| Mondelēz International Inc. | 8.83% | 4.72% | 7.69% | — | — | |
| PepsiCo Inc. | 13.36% | 13.48% | 13.79% | — | — | |
| Philip Morris International Inc. | 17.19% | 20.36% | 35.03% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 1,640,309 ÷ 7,284,194 = 22.52%
4 Click competitor name to see calculations.
An analysis of the financial performance from 2019 to 2023 reveals a period of significant capital expansion coupled with fluctuating operating profitability, resulting in a general decline in capital efficiency over the five-year horizon.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a general upward trajectory, growing from 1.08 billion in 2019 to 1.64 billion in 2023. A temporary contraction was observed in 2022, when profits dipped to 1.23 billion, followed by a substantial recovery in 2023, which marked the highest profit level within the analyzed period.
- Invested Capital
- Invested capital demonstrated consistent and accelerating growth throughout the period. The total capital employed rose from 3.94 billion in 2019 to 7.28 billion in 2023. The most aggressive expansion occurred between 2022 and 2023, indicating a significant increase in the resource base utilized for operations.
- Return on Invested Capital (ROIC)
- ROIC remained stable and high between 2019 and 2021, fluctuating slightly between 27.48% and 28.60%. A sharp deterioration occurred in 2022, with the ratio falling to 21.07%, driven by the simultaneous decrease in NOPAT and increase in invested capital. Although ROIC recovered slightly to 22.52% in 2023, it remains notably lower than the 2019-2021 average. This indicates that the growth in the capital base has outpaced the growth in operating profits, leading to a diminished rate of return on each dollar invested.
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Decomposition of ROIC
Monster Beverage Corp., decomposition of ROIC
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
Return on invested capital (ROIC) remained relatively stable between 2019 and 2021, peaking at 28.60% in 2020. A significant contraction was observed in 2022, with ROIC falling to 21.07%, followed by a modest recovery to 22.52% in 2023. The overall trajectory suggests that while the organization maintains a strong return profile, performance has faced downward pressure since 2021.
- Operating Profit Margin (OPM)
- The operating profit margin was the primary driver of ROIC volatility. After reaching a peak of 35.07% in 2020, the margin declined significantly to 24.80% in 2022, representing the most substantial downward shift in the decomposition. A partial recovery to 28.76% in 2023 contributed to the subsequent uptick in overall ROIC.
- Turnover of Capital (TO)
- Capital turnover exhibited low volatility from 2019 to 2022, fluctuating between 1.06 and 1.14. However, a decline to 0.98 was recorded in 2023, marking the first time in the observed period that the ratio fell below 1.0. This indicates a decrease in the efficiency of invested capital in generating revenue during the most recent fiscal year.
- Effective Cash Tax Rate (CTR)
- The after-tax multiplier (1 minus the effective cash tax rate) demonstrated a consistent upward trend, increasing from 77.66% in 2019 to 80.10% in 2023. This steady increase reflects a reduction in the effective tax burden, which served as a mitigating factor against the declines seen in operating margins and capital turnover.
The decomposition reveals that the decline in ROIC observed in 2022 was almost entirely attributable to the contraction in operating profit margins. The recovery in 2023 was driven by improved operational margins and a lower effective tax rate, which together offset the negative impact of declining capital turnover.
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Operating Profit Margin (OPM)
Monster Beverage Corp., OPM calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,640,309) | 1,225,215) | 1,381,324) | 1,236,715) | 1,081,692) | |
| Add: Cash operating taxes2 | 407,458) | 335,159) | 399,574) | 368,211) | 311,101) | |
| Net operating profit before taxes (NOPBT) | 2,047,768) | 1,560,373) | 1,780,898) | 1,604,926) | 1,392,793) | |
| Net sales | 7,140,027) | 6,311,050) | 5,541,352) | 4,598,638) | 4,200,819) | |
| Add: Increase (decrease) in deferred revenue | (20,946) | (18,668) | (24,086) | (21,841) | (24,563) | |
| Adjusted net sales | 7,119,081) | 6,292,382) | 5,517,266) | 4,576,797) | 4,176,256) | |
| Profitability Ratio | ||||||
| OPM3 | 28.76% | 24.80% | 32.28% | 35.07% | 33.35% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Coca-Cola Co. | 28.85% | 29.15% | 33.91% | — | — | |
| Mondelēz International Inc. | 19.80% | 12.76% | 20.19% | — | — | |
| PepsiCo Inc. | 14.21% | 13.92% | 14.80% | — | — | |
| Philip Morris International Inc. | 33.34% | 38.57% | 41.51% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Adjusted net sales
= 100 × 2,047,768 ÷ 7,119,081 = 28.76%
4 Click competitor name to see calculations.
Between 2019 and 2023, a consistent upward trajectory in top-line revenue was observed, although operating efficiency experienced notable volatility. While adjusted net sales increased every year throughout the period, the conversion of these sales into operating profit fluctuated, reaching a significant trough in 2022 before recovering in 2023.
- Adjusted Net Sales Trends
- A steady increase in adjusted net sales is evident, rising from 4,176,256 thousand US dollars in 2019 to 7,119,081 thousand US dollars by 2023. This indicates consistent growth in market presence or pricing capabilities over the five-year interval.
- Net Operating Profit Before Taxes (NOPBT) Performance
- NOPBT demonstrated a general growth pattern interrupted by a contraction in 2022. Profitability increased from 2019 through 2021, peaking at 1,780,898 thousand US dollars. A decline followed in 2022 to 1,560,373 thousand US dollars, which was subsequently reversed by a substantial increase in 2023, reaching a period high of 2,047,768 thousand US dollars.
- Operating Profit Margin (OPM) Analysis
- The operating profit margin exhibited a non-linear trend, peaking at 35.07% in 2020. A subsequent downward trend occurred, with the margin falling to 32.28% in 2021 and reaching a low of 24.80% in 2022. The fact that margins declined in 2022 despite rising adjusted net sales suggests that operating expenses grew at a disproportionately faster rate than revenue during that period. A recovery to 28.76% was recorded in 2023, although the margin remained below the levels seen between 2019 and 2021.
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Turnover of Capital (TO)
Monster Beverage Corp., TO calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 7,140,027) | 6,311,050) | 5,541,352) | 4,598,638) | 4,200,819) | |
| Add: Increase (decrease) in deferred revenue | (20,946) | (18,668) | (24,086) | (21,841) | (24,563) | |
| Adjusted net sales | 7,119,081) | 6,292,382) | 5,517,266) | 4,576,797) | 4,176,256) | |
| Invested capital1 | 7,284,194) | 5,815,467) | 4,854,459) | 4,323,610) | 3,936,622) | |
| Efficiency Ratio | ||||||
| TO2 | 0.98 | 1.08 | 1.14 | 1.06 | 1.06 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Coca-Cola Co. | 0.55 | 0.54 | 0.48 | — | — | |
| Mondelēz International Inc. | 0.59 | 0.49 | 0.47 | — | — | |
| PepsiCo Inc. | 1.22 | 1.24 | 1.14 | — | — | |
| Philip Morris International Inc. | 0.68 | 0.67 | 1.08 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Invested capital. See details »
2 2023 Calculation
TO = Adjusted net sales ÷ Invested capital
= 7,119,081 ÷ 7,284,194 = 0.98
3 Click competitor name to see calculations.
The analysis of capital utilization indicates a period of scaling that initially improved efficiency before experiencing a downturn in the most recent fiscal year. While adjusted net sales have maintained a consistent upward trajectory, the growth in invested capital has accelerated more rapidly in the latter part of the period, leading to a reduction in the turnover ratio.
- Turnover of Capital Trend
- The turnover ratio remained stable at 1.06 between 2019 and 2020, reached a peak of 1.14 in 2021, and subsequently entered a downward trend, closing at 0.98 in 2023. This indicates that by the end of 2023, the invested capital exceeded the annual adjusted net sales, signaling a decrease in the efficiency of capital deployment relative to revenue generation.
- Revenue Growth Dynamics
- Adjusted net sales demonstrated sustained growth over the five-year period, increasing from 4.18 billion USD in 2019 to 7.12 billion USD in 2023. This consistent expansion suggests strong market demand and successful top-line growth.
- Invested Capital Expansion
- Invested capital grew from 3.94 billion USD in 2019 to 7.28 billion USD in 2023. A notable acceleration in capital investment occurred between 2022 and 2023, where the increase in invested capital outpaced the increase in adjusted net sales, directly contributing to the decline in the turnover ratio to below 1.0.
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Effective Cash Tax Rate (CTR)
Monster Beverage Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,640,309) | 1,225,215) | 1,381,324) | 1,236,715) | 1,081,692) | |
| Add: Cash operating taxes2 | 407,458) | 335,159) | 399,574) | 368,211) | 311,101) | |
| Net operating profit before taxes (NOPBT) | 2,047,768) | 1,560,373) | 1,780,898) | 1,604,926) | 1,392,793) | |
| Tax Rate | ||||||
| CTR3 | 19.90% | 21.48% | 22.44% | 22.94% | 22.34% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Coca-Cola Co. | 17.54% | 19.26% | 14.55% | — | — | |
| Mondelēz International Inc. | 23.80% | 24.96% | 18.38% | — | — | |
| PepsiCo Inc. | 22.85% | 22.12% | 18.12% | — | — | |
| Philip Morris International Inc. | 24.72% | 21.27% | 21.67% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 407,458 ÷ 2,047,768 = 19.90%
4 Click competitor name to see calculations.
The analysis of the company's effective cash tax rate from 2019 to 2023 indicates a gradual decrease in the proportion of operating profit allocated to cash taxes. Despite an overall increase in the absolute volume of taxes paid and operating profit, the relative tax burden has contracted, particularly in the most recent two years of the observed period.
- Net Operating Profit Before Taxes (NOPBT) Trends
- A general upward trajectory is observed in NOPBT, which grew from US$ 1,392,793 thousand in 2019 to US$ 2,047,768 thousand in 2023. This growth was interrupted by a contraction in 2022, where profit fell to US$ 1,560,373 thousand before rebounding strongly in 2023.
- Cash Operating Tax Trends
- Cash operating taxes followed a similar pattern to NOPBT, rising from US$ 311,101 thousand in 2019 to US$ 407,458 thousand in 2023. The peak in cash taxes coincided with the peak in NOPBT in 2023, although the growth in tax payments did not keep pace with the growth in operating profit.
- Effective Cash Tax Rate (CTR) Dynamics
- The effective cash tax rate remained relatively stable between 2019 and 2021, fluctuating within a narrow range of 22.34% to 22.94%. However, a clear downward trend emerged thereafter, with the rate decreasing to 21.48% in 2022 and further declining to 19.90% by December 31, 2023, representing the lowest tax rate in the five-year period.
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