Roper Technologies Inc. (NASDAQ:ROP)

The financial data reveals several important trends over the five-year period ending in 2022.

Net Operating Profit After Taxes (NOPAT)

There was a notable increase in NOPAT from 2018 to 2019, rising from approximately 1.15 billion to nearly 2 billion US dollars. However, this was followed by a sharp decline in 2020 to around 1.25 billion, with a slight recovery in 2021 up to approximately 1.34 billion. In 2022, NOPAT decreased again to about 1.28 billion, indicating some volatility in profitability after the peak in 2019.

Cost of Capital

The cost of capital remained relatively stable, fluctuating between 12.68% and 13.84% over the five years. It reached its lowest point in 2020 (12.68%) and peaked in 2022 (13.84%), suggesting a slight increase in the expected return required by investors during the most recent period.

Invested Capital

Invested capital showed a consistent upward trend, expanding from approximately 14.8 billion in 2018 to 26.2 billion in 2022. The largest jump occurred between 2019 and 2020, where invested capital increased by over 3.8 billion, indicating substantial capital deployment or acquisition activity during that time.

Economic Profit

Economic profit remained negative across all years, reflecting that the returns generated did not exceed the cost of capital. Although there was an improvement in 2019 compared to 2018, with the economic loss decreasing from about -878 million to -366 million, the trend reversed afterward. It deteriorated significantly in 2020 and stayed at a similar negative level in 2021 before worsening further in 2022 to approximately -2.35 billion. This indicates increasing economic losses despite the growth in invested capital.

Overall, the data reflects a company experiencing increased capital investment and fluctuating operating profit, but facing challenges in generating economic profit above the cost of capital. The sustained negative economic profit points to value destruction in recent years, particularly from 2020 onward, despite a generally rising cost of capital and the large expansion in invested capital.

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 exhibited a highly negative trend over the observed period. Starting at -877,953 thousand US dollars in 2018, the economic loss decreased in magnitude to -366,450 thousand US dollars in 2019, indicating some improvement. However, from 2020 onwards, economic profit deteriorated significantly, reaching -1,664,768 thousand in 2020, -1,671,239 thousand in 2021, and further declining to -2,353,389 thousand dollars in 2022. This indicates increasing economic losses over the last three years.

Invested capital

Invested capital showed a consistent upward trend throughout the period. It increased from 14,785,177 thousand US dollars in 2018 to 17,154,600 thousand in 2019, and further accelerated to 23,002,900 thousand in 2020. Despite a slight decline in 2021 to 22,504,600 thousand, the invested capital rose again to its highest level of 26,216,800 thousand dollars in 2022. Overall, this indicates steady growth in the capital base invested in the company.

Economic spread ratio

The economic spread ratio remained negative through all periods, reflecting a consistent inability to generate returns above the cost of capital. It started at -5.94% in 2018, improved to -2.14% in 2019, but then worsened progressively from 2020 at -7.24%, to -7.43% in 2021, and further declined to -8.98% in 2022. This downward trajectory indicates increasing inefficiency in generating economic value relative to invested capital.

Economic Profit

The economic profit showed a consistently negative trend throughout the five-year period, indicating an ongoing shortfall relative to the cost of capital. Starting at -877,953 thousand US dollars in 2018, it improved somewhat in 2019, reaching -366,450 thousand US dollars. However, from 2020 onward, the economic loss sharply deepened, reaching -1,664,768 thousand US dollars in 2020 and remaining substantially high at -1,671,239 thousand US dollars in 2021. The decline continued further in 2022, with economic profit dropping to -2,353,389 thousand US dollars, marking the lowest point in the observed timeframe.

Adjusted Net Revenues

Adjusted net revenues exhibited a generally positive upward trend through most of the period under review until 2021, increasing from 5,300,700 thousand US dollars in 2018 to a peak of 5,950,400 thousand US dollars in 2021. However, in 2022, revenues declined to 5,677,800 thousand US dollars, indicating a reversal of the prior growth trend. Despite this fall, the 2022 revenue level remained above the initial 2018 figure, suggesting some overall revenue growth over the five years.

Economic Profit Margin

Economic profit margin mirrored the economic profit pattern, remaining negative throughout the period and showing substantial volatility. It started at -16.56% in 2018 and improved to -6.63% in 2019, signaling a less negative margin. Subsequently, the margin worsened dramatically, reaching -29.21% in 2020 and slightly improving to -28.09% in 2021. In 2022, the margin deteriorated further to -41.45%, the lowest point during these years. This decline indicates that economic losses relative to revenues increased significantly, suggesting potentially heightened inefficiencies or increased costs relative to revenue generation.

Summary of Trends and Insights

Overall, the company exhibited a pattern of negative economic profitability, reflecting challenges in generating returns exceeding its cost of capital. Although adjusted net revenues generally grew until 2021, the gains in revenue did not translate into positive economic profit or margin improvements in the later years. The sharp deterioration in economic profit and margin after 2019 indicates rising costs, diminishing operational efficiency, or possibly elevated capital charges. The revenue decline in 2022 coupled with the worst economic profit margin points to increasing financial pressures that may warrant deeper operational or strategic reassessment.