Return on Capital (ROC)
Advanced level
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company’s debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Netflix Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,494,304 | 1,651,757 | 698,849 | 350,945 | 236,693 | |
| Invested capital2 | 24,144,190 | 17,072,770 | 10,832,398 | 6,418,756 | 4,681,790 | |
| Performance Ratio | ||||||
| ROIC3 | 10.33% | 9.67% | 6.45% | 5.47% | 5.06% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Charter Communications Inc. | 3.84% | 3.27% | 2.19% | 2.17% | 1.49% | |
| Comcast Corp. | 8.16% | 7.36% | 9.13% | 7.92% | 8.00% | |
| Walt Disney Co. | 9.47% | 15.25% | 12.78% | 15.18% | 13.28% | |
Based on: 10-K (filing date: 2020-01-29), 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28).
1 NOPAT. See details »
2 Invested capital. See details »
3 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,494,304 ÷ 24,144,190 = 10.33%
4 Click competitor name to see calculations.
| Performance ratio | Description | The company |
|---|---|---|
| ROIC | A measure of the periodic, after tax, cash-on-cash yield earned in the business. | Netflix Inc.’s ROIC improved from 2017 to 2018 and from 2018 to 2019. |
Decomposition of ROIC
Netflix Inc., decomposition of ROIC
Based on: 10-K (filing date: 2020-01-29), 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The primary reason for the increase in return on invested capital (ROIC) over 2019 year is the increase in profitability measured by operating profit margin (OPM) ratio.
Operating Profit Margin (OPM)
Netflix Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,494,304 | 1,651,757 | 698,849 | 350,945 | 236,693 | |
| Add: Cash operating taxes2 | 438,458 | 202,748 | 228,481 | 182,256 | 132,053 | |
| Net operating profit before taxes (NOPBT) | 2,932,762 | 1,854,505 | 927,330 | 533,200 | 368,746 | |
| Revenues | 20,156,447 | 15,794,341 | 11,692,713 | 8,830,669 | 6,779,511 | |
| Add: Increase (decrease) in deferred revenue | 163,846 | 142,277 | 175,150 | 96,751 | 72,135 | |
| Adjusted revenues | 20,320,293 | 15,936,618 | 11,867,863 | 8,927,420 | 6,851,646 | |
| Profitability Ratio | ||||||
| OPM3 | 14.43% | 11.64% | 7.81% | 5.97% | 5.38% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Charter Communications Inc. | 13.58% | 12.10% | 9.95% | 13.62% | 10.51% | |
| Comcast Corp. | 19.82% | 20.86% | 22.39% | 21.54% | 22.24% | |
| Walt Disney Co. | 24.38% | 26.20% | 26.20% | 27.51% | 27.01% | |
Based on: 10-K (filing date: 2020-01-29), 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × 2,932,762 ÷ 20,320,293 = 14.43%
4 Click competitor name to see calculations.
| Profitability ratio | Description | The company |
|---|---|---|
| OPM | The operating profit margin (OPM) is the ratio of pretax economic earnings, or NOPBT, to sales. | Netflix Inc.’s OPM improved from 2017 to 2018 and from 2018 to 2019. |
Turnover of Capital (TO)
Netflix Inc., TO calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenues | 20,156,447 | 15,794,341 | 11,692,713 | 8,830,669 | 6,779,511 | |
| Add: Increase (decrease) in deferred revenue | 163,846 | 142,277 | 175,150 | 96,751 | 72,135 | |
| Adjusted revenues | 20,320,293 | 15,936,618 | 11,867,863 | 8,927,420 | 6,851,646 | |
| Invested capital1 | 24,144,190 | 17,072,770 | 10,832,398 | 6,418,756 | 4,681,790 | |
| Efficiency Ratio | ||||||
| TO2 | 0.84 | 0.93 | 1.10 | 1.39 | 1.46 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Charter Communications Inc. | 0.33 | 0.32 | 0.30 | 0.21 | 0.26 | |
| Comcast Corp. | 0.50 | 0.44 | 0.52 | 0.51 | 0.51 | |
| Walt Disney Co. | 0.42 | 0.75 | 0.69 | 0.75 | 0.77 | |
Based on: 10-K (filing date: 2020-01-29), 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28).
1 Invested capital. See details »
2 2019 Calculation
TO = Adjusted revenues ÷ Invested capital
= 20,320,293 ÷ 24,144,190 = 0.84
3 Click competitor name to see calculations.
| Efficiency ratio | Description | The company |
|---|---|---|
| TO | The turnover of capital (TO) is the ratio of sales to invested capital. Capital turnover is a function of the efficiency of working capital management and of net fixed assets. | Netflix Inc.’s TO deteriorated from 2017 to 2018 and from 2018 to 2019. |
Effective Cash Tax Rate (CTR)
Netflix Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,494,304 | 1,651,757 | 698,849 | 350,945 | 236,693 | |
| Add: Cash operating taxes2 | 438,458 | 202,748 | 228,481 | 182,256 | 132,053 | |
| Net operating profit before taxes (NOPBT) | 2,932,762 | 1,854,505 | 927,330 | 533,200 | 368,746 | |
| Tax Rate | ||||||
| CTR3 | 14.95% | 10.93% | 24.64% | 34.18% | 35.81% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Charter Communications Inc. | 14.93% | 15.66% | 27.40% | 23.33% | 45.30% | |
| Comcast Corp. | 18.28% | 19.69% | 22.14% | 28.59% | 30.07% | |
| Walt Disney Co. | 7.19% | 22.15% | 29.74% | 26.05% | 36.31% | |
Based on: 10-K (filing date: 2020-01-29), 10-K (filing date: 2019-01-29), 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 438,458 ÷ 2,932,762 = 14.95%
4 Click competitor name to see calculations.
| Tax rate | Description | The company |
|---|---|---|
| CTR | Effective cash tax rate on operating income. | Netflix Inc.’s CTR decreased from 2017 to 2018 but then slightly increased from 2018 to 2019. |