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)
Roper Technologies Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,275,289) | 1,343,194) | 1,253,044) | 1,986,174) | 1,152,486) | |
| Invested capital2 | 26,216,800) | 22,504,600) | 23,002,900) | 17,154,600) | 14,785,177) | |
| Performance Ratio | ||||||
| ROIC3 | 4.86% | 5.97% | 5.45% | 11.58% | 7.79% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Apple Inc. | 217.85% | 214.07% | — | — | — | |
| Arista Networks Inc. | 38.80% | 53.84% | — | — | — | |
| Cisco Systems Inc. | 21.11% | 20.34% | — | — | — | |
| Dell Technologies Inc. | 14.58% | 9.51% | — | — | — | |
| Lumentum Holdings Inc. | 9.32% | 22.51% | — | — | — | |
| Super Micro Computer Inc. | 14.13% | 8.04% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 1,275,289 ÷ 26,216,800 = 4.86%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by a significant expansion of the capital base that has not been matched by proportional growth in operating profits, leading to a general decline in capital efficiency.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability experienced significant volatility during the period. After a substantial increase from 1,152,486 thousand US dollars in 2018 to a peak of 1,986,174 thousand US dollars in 2019, NOPAT saw a sharp contraction in 2020. From 2020 through 2022, profit levels remained relatively stagnant, fluctuating within a narrow range between 1,253,044 thousand and 1,343,194 thousand US dollars.
- Invested Capital
- There is a consistent upward trend in the total amount of invested capital. The capital base grew from 14,785,177 thousand US dollars in 2018 to 26,216,800 thousand US dollars by the end of 2022. The most notable increase occurred between 2019 and 2020, where invested capital rose by approximately 34%, indicating aggressive capital deployment or acquisition activity during that timeframe.
- Return on Invested Capital (ROIC)
- ROIC peaked in 2019 at 11.58%, representing the highest level of capital efficiency in the analyzed period. However, a downward trajectory followed, with the ratio falling to 4.86% by 2022. This decline is the direct result of the widening gap between the rapidly increasing invested capital and the stagnating NOPAT. The compression of the ROIC from 11.58% to 4.86% suggests that recent capital investments have yielded lower marginal returns compared to earlier periods.
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Decomposition of ROIC
Roper Technologies Inc., decomposition of ROIC
Based on: 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), 10-K (reporting date: 2018-12-31).
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 2018 and 2022, characterized by a peak in 2019 followed by a sustained decline. After reaching a maximum of 11.58% in 2019, the metric dropped sharply to 5.45% in 2020 and concluded the period at a five-year low of 4.86% in 2022.
- Operating Profit Margin (OPM)
- Profitability margins showed a non-linear trend. A substantial spike occurred in 2019, where the margin reached 46.65%, contributing significantly to that year's ROIC peak. However, the margin reverted to a baseline range of approximately 28% in 2020 and 2021, before showing a moderate recovery to 31.46% by the end of 2022.
- Turnover of Capital (TO)
- A consistent downward trajectory is observed in capital turnover, which declined from 0.36 in 2018 to 0.22 in 2022. This steady erosion in asset efficiency indicates that the company generated progressively fewer revenues per unit of invested capital throughout the five-year period, acting as a primary drag on overall return.
- Effective Cash Tax Rate Impact
- The tax component, expressed as 1 minus the effective cash tax rate, remained relatively stable for the majority of the period, fluctuating between 76.36% and 80.16%. A notable decrease occurred in 2022, falling to 71.39%, which suggests an increase in the effective tax burden that further pressured the ROIC in the final year.
- ROIC Decomposition Analysis
- The decomposition reveals that the 2019 performance surge was driven by a temporary expansion in operating margins rather than improved capital efficiency. The subsequent long-term decline in ROIC is most closely correlated with the continuous deterioration of capital turnover, which offset the marginal improvements in operating profit margins observed in 2022.
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Operating Profit Margin (OPM)
Roper Technologies Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,275,289) | 1,343,194) | 1,253,044) | 1,986,174) | 1,152,486) | |
| Add: Cash operating taxes2 | 511,065) | 332,378) | 364,900) | 590,630) | 356,809) | |
| Net operating profit before taxes (NOPBT) | 1,786,354) | 1,675,572) | 1,617,945) | 2,576,804) | 1,509,295) | |
| Net revenues | 5,371,800) | 5,777,800) | 5,527,100) | 5,366,800) | 5,191,200) | |
| Add: Increase (decrease) in deferred revenue | 306,000) | 172,600) | 172,700) | 157,300) | 109,500) | |
| Adjusted net revenues | 5,677,800) | 5,950,400) | 5,699,800) | 5,524,100) | 5,300,700) | |
| Profitability Ratio | ||||||
| OPM3 | 31.46% | 28.16% | 28.39% | 46.65% | 28.47% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Apple Inc. | 30.44% | 30.11% | — | — | — | |
| Arista Networks Inc. | 37.17% | 37.38% | — | — | — | |
| Cisco Systems Inc. | 29.29% | 28.52% | — | — | — | |
| Dell Technologies Inc. | 9.11% | 9.27% | — | — | — | |
| Lumentum Holdings Inc. | 18.07% | 30.09% | — | — | — | |
| Super Micro Computer Inc. | 7.18% | 3.35% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Adjusted net revenues
= 100 × 1,786,354 ÷ 5,677,800 = 31.46%
4 Click competitor name to see calculations.
The operating performance from 2018 to 2022 is characterized by a general trend of stability punctuated by a significant anomaly in 2019. While adjusted net revenues followed a growth trajectory for the majority of the period, operational profitability exhibited more volatility.
- Adjusted Net Revenues
- A consistent upward trend in revenues was observed from 2018 to 2021, rising from 5.30 billion to a peak of 5.95 billion. This growth phase was followed by a moderate contraction in 2022, where revenues decreased to 5.68 billion.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT experienced a sharp increase in 2019, reaching 2.58 billion, before reverting to 1.62 billion in 2020. Subsequent years showed a steady recovery, with NOPBT climbing to 1.68 billion in 2021 and further increasing to 1.79 billion in 2022.
- Operating Profit Margin (OPM)
- The operating profit margin remained relatively baseline around 28% in 2018, 2020, and 2021. A substantial spike to 46.65% occurred in 2019, representing a significant deviation from the norm. In 2022, the margin expanded to 31.46%, indicating an improvement in profitability efficiency despite the concurrent decline in adjusted net revenues.
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Turnover of Capital (TO)
Roper Technologies Inc., TO calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net revenues | 5,371,800) | 5,777,800) | 5,527,100) | 5,366,800) | 5,191,200) | |
| Add: Increase (decrease) in deferred revenue | 306,000) | 172,600) | 172,700) | 157,300) | 109,500) | |
| Adjusted net revenues | 5,677,800) | 5,950,400) | 5,699,800) | 5,524,100) | 5,300,700) | |
| Invested capital1 | 26,216,800) | 22,504,600) | 23,002,900) | 17,154,600) | 14,785,177) | |
| Efficiency Ratio | ||||||
| TO2 | 0.22 | 0.26 | 0.25 | 0.32 | 0.36 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Apple Inc. | 8.46 | 8.61 | — | — | — | |
| Arista Networks Inc. | 1.45 | 1.71 | — | — | — | |
| Cisco Systems Inc. | 0.89 | 0.90 | — | — | — | |
| Dell Technologies Inc. | 1.91 | 1.16 | — | — | — | |
| Lumentum Holdings Inc. | 0.68 | 0.89 | — | — | — | |
| Super Micro Computer Inc. | 2.35 | 2.77 | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 Invested capital. See details »
2 2022 Calculation
TO = Adjusted net revenues ÷ Invested capital
= 5,677,800 ÷ 26,216,800 = 0.22
3 Click competitor name to see calculations.
The financial data indicates a consistent downward trend in the turnover of capital from 2018 to 2022, reflecting a decrease in the efficiency with which invested capital is being utilized to generate revenue.
- Adjusted Net Revenues
- Revenues experienced steady growth between 2018 and 2021, increasing from 5.30 billion to 5.95 billion. However, this growth trend reversed in 2022, with revenues declining to 5.68 billion, indicating a contraction from the prior year's peak.
- Invested Capital
- A substantial expansion of the invested capital base is observed over the analyzed period. The capital increased from 14.79 billion in 2018 to 26.22 billion by 2022. The most aggressive growth occurred between 2019 and 2020, where capital rose from 17.15 billion to 23.00 billion.
- Turnover of Capital (TO)
- The turnover ratio declined from 0.36 in 2018 to 0.22 in 2022. While there was a slight stabilization in 2021 at 0.26, the overall trajectory remains negative. This decline is the direct result of the invested capital growing at a rate that significantly outpaced revenue growth, leading to diminished capital productivity.
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Effective Cash Tax Rate (CTR)
Roper Technologies Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 1,275,289) | 1,343,194) | 1,253,044) | 1,986,174) | 1,152,486) | |
| Add: Cash operating taxes2 | 511,065) | 332,378) | 364,900) | 590,630) | 356,809) | |
| Net operating profit before taxes (NOPBT) | 1,786,354) | 1,675,572) | 1,617,945) | 2,576,804) | 1,509,295) | |
| Tax Rate | ||||||
| CTR3 | 28.61% | 19.84% | 22.55% | 22.92% | 23.64% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Apple Inc. | 15.42% | 17.39% | — | — | — | |
| Arista Networks Inc. | 28.07% | 15.62% | — | — | — | |
| Cisco Systems Inc. | 19.15% | 20.48% | — | — | — | |
| Dell Technologies Inc. | 16.21% | 11.88% | — | — | — | |
| Lumentum Holdings Inc. | 24.68% | 15.64% | — | — | — | |
| Super Micro Computer Inc. | 16.27% | 13.44% | — | — | — | |
Based on: 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), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 511,065 ÷ 1,786,354 = 28.61%
4 Click competitor name to see calculations.
The effective cash tax rate (CTR) exhibited a gradual downward trend from 2018 through 2021, followed by a significant increase in 2022. This volatility reflects shifting relationships between net operating profit before taxes (NOPBT) and actual cash tax outflows over the five-year period.
- Effective Cash Tax Rate Trajectory
- From 2018 to 2021, the CTR decreased consistently from 23.64% to a period low of 19.84%. This sustained decline suggests a period of increasing tax efficiency or the utilization of tax shields. However, this trend reversed sharply in 2022, with the rate climbing to 28.61%, representing the highest tax burden relative to operating profit within the observed timeframe.
- Analysis of Net Operating Profit Before Taxes (NOPBT)
- Operating profitability peaked in 2019 at 2.577 billion US dollars, which coincided with the highest absolute cash tax payment of 590.63 million US dollars. Following this peak, NOPBT contracted in 2020 and remained relatively stable through 2022, fluctuating between 1.618 billion and 1.786 billion US dollars. The lack of proportional growth in NOPBT relative to the 2022 tax increase contributed to the sharp spike in the CTR.
- Cash Operating Tax Fluctuations
- Cash tax expenditures demonstrated significant variance, falling from 590.63 million US dollars in 2019 to a low of 332.38 million US dollars in 2021. The subsequent increase to 511.07 million US dollars in 2022 occurred despite NOPBT remaining below 2019 levels, indicating a divergence between operating performance and cash tax obligations in the final year of the analysis.
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