Roper Technologies Inc. (NASDAQ:ROP)

The financial performance over the examined periods exhibits notable fluctuations and trends in key operational and capital efficiency metrics.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates a strong increase in 2019 compared to 2018, more than doubling from approximately $1.15 billion to nearly $2 billion. However, this peak was not sustained in the following years, with NOPAT declining significantly in 2020 to about $1.25 billion, then showing a modest recovery through 2021, and slightly decreasing again in 2022 to approximately $1.28 billion. This suggests volatility in operational profitability, with a sharp rise followed by a decline but maintaining a level above that seen in 2018.

Cost of Capital

The cost of capital has remained relatively consistent across the period, fluctuating within a narrow range from 12.7% to 13.86%. The lowest point was recorded in 2020 (12.7%), and the highest in 2022 (13.86%). This slight increase in cost of capital could contribute to pressures on the company’s economic profitability.

Invested Capital

Invested capital has shown a persistent upward trend throughout the years, increasing from about $14.8 billion in 2018 to approximately $26.2 billion in 2022. The most significant jump occurred between 2019 and 2020, where invested capital surged from $17.15 billion to $23 billion, indicating substantial investment or capital allocation during that period.

Economic Profit

Economic profit is consistently negative across all observed years, reflecting a shortfall when comparing net operating profit to the required return on capital. While the magnitude of negative economic profit improved from 2018 (-$880 million) through 2019 (-$369 million), it deteriorated substantially in 2020, reaching losses exceeding $1.6 billion. The negative trend continued with further declines in 2021 and 2022, culminating in a substantial deficit of approximately $2.36 billion in 2022. This suggests the company has struggled to generate returns in excess of its cost of capital, particularly after 2019.

Overall, while the company experienced a peak in operational profitability in 2019, this was accompanied by an increasing invested capital base and a steady or rising cost of capital. The persistent negative economic profit indicates that returns generated were insufficient to cover the capital costs, especially from 2020 onwards. The increased capital investment has not translated into proportional economic value creation during the observed span.

Net Earnings

Net earnings exhibited considerable fluctuation over the analyzed period. Beginning at approximately $944 million in 2018, earnings nearly doubled to about $1.77 billion in 2019. However, there was a notable decline to roughly $950 million in 2020, followed by a moderate increase to approximately $1.15 billion in 2021. The most significant change occurred in 2022, when net earnings surged sharply to approximately $4.54 billion, representing the highest value in the time series by a wide margin. This pattern indicates substantial volatility, with a pronounced financial performance improvement in the latest year.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a relatively more stable trajectory compared to net earnings. Starting at about $1.15 billion in 2018, NOPAT increased substantially to nearly $2.0 billion in 2019. After this peak, it declined to roughly $1.25 billion in 2020 but experienced a slight recovery in 2021 with a value of approximately $1.34 billion. In 2022, NOPAT decreased marginally to about $1.28 billion. Despite some fluctuations, the variations in NOPAT were less extreme, suggesting consistent operating profitability even during periods of net earnings volatility.

Comparative Insights

When comparing net earnings and NOPAT trends, it is evident that while both metrics showed increases in 2019, net earnings were subject to greater volatility in the subsequent years. The sharp rise in net earnings in 2022 was not paralleled to the same extent by NOPAT, which remained relatively stable. This may indicate that extraordinary or non-operational factors significantly influenced net earnings in that year. Overall, operating profitability remained relatively steady throughout the period, despite fluctuations in reported net income.

Income Tax Expense

The income tax expense shows a notable increase from 254,000 thousand US dollars in 2018 to a peak of 459,500 thousand US dollars in 2019. Following this peak, there is a sharp decline to 259,600 thousand US dollars in 2020, indicating a significant fluctuation. The values then exhibit a gradual increase in the subsequent years, rising to 288,400 thousand US dollars in 2021 and slightly further to 296,400 thousand US dollars in 2022. Overall, the tax expense demonstrates volatility over the five-year period while maintaining a level in the upper 200,000s to near 300,000 thousand US dollars range in the latest years.

Cash Operating Taxes

Cash operating taxes also exhibit a fluctuating pattern. Starting at 356,809 thousand US dollars in 2018, the figure grows substantially to 590,630 thousand US dollars in 2019, nearly a 65% increase. This is followed by a considerable reduction to 364,900 thousand US dollars in 2020. Subsequently, the cash operating taxes decline slightly in 2021 to 332,378 thousand US dollars, before escalating again sharply in 2022 to 511,065 thousand US dollars. Despite the fluctuations, the overall trend indicates significant variability with the cash operating taxes generally remaining above 300,000 thousand US dollars except for the exceptional peak and trough years.

Comparison and Insights

Both income tax expense and cash operating taxes experience their highest values in 2019, succeeded by a sharp decrease in 2020. The income tax expense shows more stability from 2020 onwards relative to cash operating taxes, which remains more volatile, especially with the substantial increase in 2022. This variance between income tax expense and cash operating taxes could suggest changes in tax payment timings or strategies impacting cash flow versus accounting recognition. The patterns imply that while accounting tax expenses are somewhat steady post-2020, actual cash tax payments are subject to larger swings.

Total Reported Debt & Leases

The total reported debt and leases increased significantly from 2018 to 2020, rising from approximately $5.19 billion to $9.85 billion. However, in the following years, debt decreased, falling to about $8.15 billion in 2021 and further to $6.87 billion by the end of 2022. This trend indicates an initial period of increased leverage followed by a reduction in debt obligations over the last two years of the period analyzed.

Stockholders’ Equity

Stockholders’ equity showed consistent growth throughout the entire time frame. Starting at around $7.74 billion in 2018, equity increased steadily each year, reaching approximately $16.04 billion by the end of 2022. The growth became more pronounced from 2021 to 2022, suggesting a strong strengthening of the company's capital base during the most recent year.

Invested Capital

Invested capital mirrored the trends observed in equity and debt, rising from about $14.79 billion in 2018 to a peak of $23 billion in 2020. A slight decrease occurred in 2021 to roughly $22.5 billion, followed by a rebound to approximately $26.2 billion in 2022. This reflects overall growth in the capital deployed by the company with some variability corresponding to changes in debt and equity levels.

Economic Profit

The economic profit demonstrated a fluctuating yet overall deteriorating trend over the analyzed period. Initially, the economic profit improved from a loss of approximately $880 million in 2018 to a smaller loss near $369 million in 2019. However, from 2020 onwards, the economic profit sharply declined, resulting in significant losses exceeding $1.6 billion in both 2020 and 2021, and further deepening to around $2.36 billion in 2022. This indicates increasing challenges in generating returns above the cost of capital.

Invested Capital

Invested capital consistently increased across the years, rising from roughly $14.8 billion in 2018 to about $26.2 billion in 2022. The sharpest growth occurred between 2019 and 2020 when invested capital climbed substantially by approximately $5.8 billion. Despite this growth, the increasing invested capital did not translate into positive economic profit, suggesting potential inefficiencies or capital investments not yielding expected returns.

Economic Spread Ratio

The economic spread ratio, reflecting the difference between return on invested capital and cost of capital as a percentage, remained negative throughout all periods. The trend shows a worsening financial performance from -5.95% in 2018 to -8.99% in 2022. This decline indicates that returns on capital have increasingly lagged behind the cost of capital, exacerbating economic losses and highlighting a decline in capital efficiency over time.

The financial data reveals several notable trends in the company's economic profit, adjusted net revenues, and economic profit margin over the five-year period ending December 31, 2022.

Economic Profit

Economic profit remained negative throughout the period, indicating consistent losses beyond the company's cost of capital. The losses diminished significantly from 2018 to 2019, improving from approximately -880 million to -369 million US dollars. However, the company experienced a substantial deterioration in 2020, with economic profit dropping sharply to about -1.67 billion US dollars. This large loss level persisted in 2021 and deepened further in 2022, reaching nearly -2.36 billion US dollars. This pattern suggests increasing economic inefficiency or challenges in generating returns above cost of capital in the later years.

Adjusted Net Revenues

Adjusted net revenues showed a generally positive but modest upward trend from 2018 through 2021. Revenues increased steadily from about 5.30 billion US dollars in 2018 to a peak of approximately 5.95 billion in 2021. However, there was a noticeable decline in 2022, with revenues falling to roughly 5.68 billion US dollars. This indicates some weakening in top-line performance after years of growth.

Economic Profit Margin

The economic profit margin, reflecting economic profit as a percentage of revenues, remained markedly negative across all years, mirroring the trend in absolute economic profit losses. The margin improved between 2018 and 2019, rising from approximately -16.6% to -6.7%, indicating less negative profitability relative to revenues. Nonetheless, from 2019 onwards, there was a sharp worsening, with the margin declining to nearly -29.3% in 2020, slightly improving to -28.1% in 2021, before further dropping to -41.5% in 2022. This declining profit margin points to increasing challenges in controlling economic costs relative to generated revenues.