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.
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Steel Dynamics Inc. pages available for free this week:
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Operating Profit Margin since 2005
- Current Ratio since 2005
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Return on Invested Capital (ROIC)
Steel Dynamics Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Freeport-McMoRan Inc. | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2021 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited significant fluctuations over the five-year period. Starting at approximately 755 million USD in 2017, it surged to around 1.42 billion USD in 2018, indicating a substantial increase in profitability. However, 2019 and 2020 saw marked declines in NOPAT, dropping to 827 million USD and 696 million USD respectively. This downturn suggests challenges impacting operational profitability during those years. In 2021, there was a notable rebound, with NOPAT reaching 3.61 billion USD, more than quadrupling from the previous year and representing the highest figure within the observed timeframe.
- Invested Capital
- Invested capital demonstrated a steady upward trend throughout the period. Beginning at nearly 6 billion USD in 2017, it increased incrementally each year, reaching approximately 6.4 billion in 2018, 6.7 billion in 2019, and slightly above 6.7 billion in 2020. The most pronounced growth occurred in 2021, where invested capital rose to about 8.55 billion USD. This consistent increase indicates ongoing investment in assets and resources to support operations and growth.
- Return on Invested Capital (ROIC)
- Return on invested capital exhibited volatility with a significant upward peak in 2021. In 2017, ROIC was 12.66%, which then increased substantially to 22.18% in 2018, reflecting improved efficiency in generating returns on capital invested. This trend reversed in 2019 and 2020, with ROIC declining to 12.31% and 10.26% respectively, highlighting reduced effectiveness in investment returns during these years. The year 2021 experienced a remarkable spike, with ROIC reaching 42.24%, indicating exceptional profitability relative to capital invested and suggesting highly efficient capital utilization during that period.
Decomposition of ROIC
Steel Dynamics Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin demonstrated variability over the reported periods, beginning at 11.24% in 2017 and increasing to a peak of 14.82% in 2018. Subsequently, it declined to 9.59% in 2019 and further to 8.39% in 2020. A significant recovery occurred in 2021, with the margin rising sharply to 23.18%, indicating enhanced operational efficiency or improved cost management in the latest year.
- Turnover of Capital (TO)
- Capital turnover exhibited similar fluctuations, starting at 1.6 in 2017 and reaching 1.85 in 2018, suggesting a more efficient use of capital assets to generate revenue. However, this ratio decreased to 1.56 in 2019 and further to 1.42 in 2020, implying a declining capital efficiency. In 2021, the turnover ratio increased markedly to 2.15, indicating a strong improvement in capital utilization performance.
- Effective Cash Tax Rate (1 - CTR)
- The metric representing the complement of the effective cash tax rate generally rose over the period, starting at 70.42% in 2017 and increasing steadily to 81.05% in 2018, 82.42% in 2019, and 86.4% in 2020. A slight decrease to 84.62% occurred in 2021. This trend suggests a higher proportion of pre-tax profits being retained after taxes, with a minor reversal in the final year.
- Return on Invested Capital (ROIC)
- Return on invested capital followed a fluctuating but overall positive trajectory. It improved from 12.66% in 2017 to a substantial peak of 22.18% in 2018, then dropped to 12.31% in 2019 and 10.26% in 2020, reflecting some operational or market challenges. A remarkable increase took place in 2021, with ROIC soaring to 42.24%, indicating significantly enhanced profitability relative to invested capital.
Operating Profit Margin (OPM)
Steel Dynamics Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Freeport-McMoRan Inc. | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2021 Calculation
OPM = 100 × NOPBT ÷ Net sales
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- During the period from 2017 to 2021, the net operating profit before taxes exhibited notable fluctuations. Initially, there was a significant increase from approximately 1.07 billion in 2017 to 1.75 billion in 2018. This was followed by a sharp decline to about 1.00 billion in 2019 and further downward to 0.81 billion in 2020. However, in 2021, the NOPBT surged substantially to 4.27 billion, representing the highest value in the period under review.
- Net Sales
- Net sales showed an overall upward trajectory with intermittent fluctuations. Sales rose from roughly 9.54 billion in 2017 to a peak of 11.82 billion in 2018. This was succeeded by a decline to approximately 10.46 billion in 2019 and further reduction to 9.60 billion in 2020. In 2021, net sales rebounded sharply to 18.41 billion, indicating strong growth and the highest sales volume recorded in the five-year span.
- Operating Profit Margin (OPM)
- The operating profit margin manifested variability over the years. Starting at 11.24% in 2017, it increased to 14.82% in 2018, aligning with the peak in both net sales and profit levels. Subsequently, the margin decreased to 9.59% in 2019 and declined further to 8.39% in 2020, reflecting the downward trend in profitability during this interval. In 2021, the margin substantially improved to 23.18%, indicating enhanced operational efficiency and profitability relative to sales, corresponding with the significant increases in NOPBT and net sales.
- Overall Insights
- The data reveals a period of growth followed by two years of contraction in both sales and profitability, possibly linked to external or internal challenges in 2019 and 2020. The sizable recovery in 2021 across net operating profit, sales, and margin suggests a strong turnaround. The marked increase in the operating profit margin reinforces the conclusion of improved operational effectiveness during the latest year assessed.
Turnover of Capital (TO)
Steel Dynamics Inc., TO calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Freeport-McMoRan Inc. | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Invested capital. See details »
2 2021 Calculation
TO = Net sales ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Net Sales
- The net sales exhibit a fluctuating trend over the observed five-year period. Starting at approximately 9.54 billion US dollars in 2017, net sales increased significantly in 2018 to about 11.82 billion, followed by a decline to around 10.46 billion in 2019. This was succeeded by a further drop in 2020 to approximately 9.60 billion. In 2021, net sales experienced a substantial surge, nearly doubling to roughly 18.41 billion. The data indicates volatility in sales with a marked growth spike in the final year.
- Invested Capital
- The invested capital shows a consistent upward trajectory throughout the period. Beginning at about 5.96 billion US dollars in 2017, it rose annually to reach approximately 8.55 billion in 2021. The annual increments are moderate but steady, suggesting ongoing investment into the capital base of the company.
- Turnover of Capital (TO)
- The turnover of capital ratio, which measures the efficiency in using invested capital to generate sales, displays notable variability. Starting at 1.6 in 2017, it increased to 1.85 in 2018, indicating improved capital utilization. However, this ratio declined over the next two years to 1.56 in 2019 and further to 1.42 in 2020, implying a reduction in capital efficiency. In 2021, the turnover ratio rebounded sharply to 2.15, reflecting a significant enhancement in capital productivity aligned with the large increase in net sales during that year.
- Summary
- Overall, the financial data reveals a pattern of fluctuating sales volume that sharply increased in the latest year, alongside a steady increase in invested capital. Capital efficiency, as indicated by the turnover ratio, improved initially, weakened during the middle years, and improved substantially in the final year. This suggests that the company may have optimized its asset usage and operational effectiveness in 2021, leading to higher sales without a proportionate increase in capital investment.
Effective Cash Tax Rate (CTR)
Steel Dynamics Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Freeport-McMoRan Inc. | ||||||
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2021 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data reveals several notable trends in the company's tax-related metrics and operating profitability over the five-year period.
- Cash Operating Taxes
- Cash payments for operating taxes exhibited fluctuations during the period. After a moderate increase from 317,257 thousand US$ in 2017 to 332,093 thousand US$ in 2018, the amount declined substantially in 2019 and 2020, reaching a low of 109,566 thousand US$. Thereafter, a sharp rise occurred in 2021, surging to 656,409 thousand US$, representing the highest figure in the timeframe.
- Net Operating Profit Before Taxes (NOPBT)
- Operating profitability, as measured by NOPBT, showed a variable pattern. Starting at 1,072,631 thousand US$ in 2017, it rose significantly to 1,752,550 thousand US$ in 2018. However, it declined in the subsequent two years, falling to 805,645 thousand US$ by 2020. The year 2021 brought a substantial recovery with NOPBT reaching 4,267,834 thousand US$, more than doubling the previous high and indicating strong operational performance.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate showed a consistent downward trend from 29.58% in 2017 to a low of 13.6% in 2020. A slight increase to 15.38% was observed in 2021. This pattern suggests improved tax efficiency or changes in tax planning strategies, with the company paying a smaller proportion of its operating profits in taxes over most of the period.
Overall, the data indicates a period of fluctuating operational profitability with a significant rebound in 2021. Despite this volatility, the effective cash tax rate declined, reducing the tax burden relative to operating profits. The sharp rise in cash operating taxes in 2021 aligns with the substantial increase in NOPBT, reflecting the corresponding rise in taxable income.