Roper Technologies Inc. (NASDAQ:ROP)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited considerable fluctuation over the five-year period. Starting at approximately 1.15 billion US dollars at the end of 2018, the figure peaked sharply in 2019, reaching nearly 2 billion US dollars. However, it declined significantly in 2020 to about 1.25 billion US dollars, followed by a modest increase in 2021. By the end of 2022, NOPAT slightly decreased again, ending at approximately 1.28 billion US dollars. The variability suggests the company faced operational or market challenges after 2019 that impacted profitability before some recovery in the subsequent years.

Invested Capital

Invested capital demonstrated a consistent upward trend throughout the entire reporting period. Beginning at roughly 14.78 billion US dollars at the close of 2018, there was a notable increase in 2019. A more pronounced rise occurred in 2020, with invested capital reaching over 23 billion US dollars. Despite a minor dip in 2021, invested capital surged again in 2022, ultimately reaching about 26.2 billion US dollars. This pattern indicates ongoing capital investments or acquisitions that expanded the company’s asset base significantly over the period.

Return on Invested Capital (ROIC)

Return on invested capital showed a declining trend with considerable variation. Starting at approximately 7.79% in 2018, ROIC increased to a peak of 11.58% in 2019, coinciding with the highest recorded NOPAT. Subsequently, a sharp decline occurred in 2020, falling to 5.45%, followed by a marginal recovery in 2021 to 5.97%. By the end of 2022, ROIC decreased further to 4.86%, indicating that despite increased invested capital, the company’s efficiency in generating returns from its investments weakened progressively after 2019. This deterioration suggests that increments in capital have not been matched by proportional increases in profitability.

The analysis of the financial metrics over the five-year period reveals several noteworthy trends in profitability, capital efficiency, tax impact, and overall return generation.

Operating Profit Margin (OPM)

The operating profit margin experienced a pronounced increase from 28.47% in 2018 to a peak of 46.65% in 2019, indicating a significant improvement in operational profitability that year. Subsequently, the margin declined sharply in 2020, almost returning to 2018 levels, and remained relatively stable around 28% through 2021. In 2022, there was a moderate recovery to 31.46%, suggesting some operational efficiency improvements but not reaching the elevated 2019 level.

Turnover of Capital (TO)

Capital turnover demonstrated a consistent declining trend throughout the period. Starting at 0.36 in 2018, it decreased steadily year-over-year to 0.22 by 2022. This decline suggests decreasing efficiency in generating sales from invested capital, potentially reflecting more capital investment without proportional revenue growth or slowing asset utilization.

1 – Effective Cash Tax Rate (CTR)

The measure representing (1 - effective cash tax rate) was relatively stable and high around 76-80% from 2018 through 2021, implying a relatively low effective cash tax rate. However, in 2022, this metric decreased significantly to 71.39%, indicating an increase in the effective cash tax rate and therefore higher tax payments relative to cash profits in that year.

Return on Invested Capital (ROIC)

Return on invested capital showed volatility and an overall deteriorating trend from 2018 to 2022. After rising from 7.79% in 2018 to a peak of 11.58% in 2019, it dropped sharply to 5.45% in 2020. A slight recovery to 5.97% occurred in 2021, followed by a further decline to 4.86% in 2022. This pattern indicates diminishing returns from the capital invested, which may be a concern regarding capital allocation effectiveness in recent years.

In summary, the company exhibited a one-time spike in operating profitability and returns on capital in 2019, followed by regression to lower but somewhat stable profitability margins and significantly declining capital turnover. The rising effective cash tax rate in 2022 may have further pressured net performance metrics. Overall, the trends suggest challenges in maintaining efficiency and profitability from invested capital in recent periods.

The financial data over the five-year period reveals several notable trends in profitability and revenue performance.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT experienced a significant increase from 1,509,295 thousand US dollars in 2018 to a peak of 2,576,804 thousand US dollars in 2019. However, there was a marked decline in 2020, where the NOPBT fell to 1,617,945 thousand US dollars. Following that, the NOPBT showed a moderate recovery in the subsequent years, rising to 1,675,572 thousand US dollars in 2021 and further to 1,786,354 thousand US dollars in 2022. Despite not reaching the 2019 peak again, the trend from 2020 onwards suggests a gradual improvement in profitability before taxes.

Adjusted Net Revenues

Adjusted net revenues showed a generally increasing trend from 2018 through 2021. Starting at 5,300,700 thousand US dollars in 2018, revenues rose steadily each year, reaching 5,950,400 thousand US dollars by 2021. Nevertheless, there was a noticeable downturn in 2022 when revenues declined to 5,677,800 thousand US dollars. This dip contrasts with the prior upward trajectory and may indicate emerging challenges in revenue generation or market conditions impacting sales.

Operating Profit Margin (OPM)

The operating profit margin displayed wide variability across the years. In 2018, the margin stood at 28.47%, which then surged remarkably to 46.65% in 2019, aligning with the peak in NOPBT seen that year. This spike suggests exceptional operational efficiency or favorable cost management in 2019. Subsequently, the margin dropped substantially in 2020 to 28.39% and remained relatively stable through 2021 at 28.16%. There was a modest improvement in 2022, increasing to 31.46%. Overall, while 2019 was an outlier year with very high profitability margins, the following years settled into a lower but more consistent profitability range.

In summary, the period from 2018 to 2022 is characterized by a peak in both profit and margin in 2019, followed by declines related to 2020 and some recovery afterwards. Revenues generally trended upward until 2021, then dipped in 2022, signaling potential emerging constraints. Operating profitability margins, after peaking in 2019, returned to levels modestly higher than those in 2018 by the end of the period, indicating some strengthening of operational efficiency after an initial downturn.

Adjusted net revenues

Adjusted net revenues demonstrated an overall increasing trend from 2018 through 2021, rising from approximately $5.3 billion to nearly $6.0 billion. However, in 2022, the revenues experienced a decline, decreasing to about $5.7 billion. The initial growth suggests expanding sales or pricing power, followed by a moderate contraction in the final year observed.

Invested capital

Invested capital showed a consistent upward trajectory across the entire period analyzed. The figure increased substantially from around $14.8 billion in 2018 to a peak exceeding $26.2 billion by the end of 2022. This significant increase indicates ongoing investments or asset accumulation, potentially for growth or capacity expansion.

Turnover of capital (TO)

Turnover of capital, which measures how efficiently the invested capital is utilized to generate revenues, displayed a declining trend throughout the timeline. Beginning at 0.36 in 2018, the ratio steadily decreased to 0.22 by 2022. The decline suggests that despite the growth in invested capital, revenue generation relative to this investment has diminished, indicating reduced capital efficiency over time.

Cash Operating Taxes

The cash operating taxes exhibited significant fluctuations during the five-year period. Starting at approximately 357 million US dollars in 2018, the amount increased substantially to around 591 million in 2019. Subsequently, the taxes declined to near 365 million in 2020 and continued to decrease slightly to about 332 million in 2021. In 2022, there was a marked increase, with cash operating taxes rising to over 511 million. This pattern suggests variability in taxable income or changes in tax regulations impacting tax payments.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes showed considerable volatility across the analyzed years. It nearly doubled from approximately 1.51 billion US dollars in 2018 to about 2.58 billion in 2019, indicating a strong improvement in operating profitability. However, in 2020, the profit declined sharply to approximately 1.62 billion, followed by a slight recovery to around 1.68 billion in 2021. The figure increased modestly again in 2022, reaching about 1.79 billion. These trends point to fluctuating operational performance potentially influenced by external economic conditions or internal factors affecting operational efficiency.

Effective Cash Tax Rate (CTR)

The effective cash tax rate demonstrated a generally declining trend from 2018 through 2021, moving from 23.64% down to 19.84%. This decline may reflect tax planning strategies, changes in tax laws, or shifts in the composition of taxable income. However, in 2022, the rate sharply increased to 28.61%, reaching the highest level observed in the period. This increase could be attributable to changes in tax legislation, reduced availability of tax credits or deductions, or an increase in taxable income at higher rates.

Overall Analysis

Throughout the examined period, the financial data indicates variability in both operating profits and tax payments. The high volatility in net operating profit before taxes, especially the peak in 2019 followed by a decline in 2020, may relate to broader economic disruptions or company-specific operational challenges. The fluctuating cash operating taxes and changes in the effective cash tax rate suggest that tax strategies and regulatory environments have significantly influenced tax expenses. The notable rise in tax rate and tax paid in 2022, despite moderate recovery in operating profit, could indicate a changing tax landscape or one-off tax adjustments affecting the company’s cash tax burden.