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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AbbVie Inc. pages available for free this week:
- Common-Size Income Statement
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
- Return on Assets (ROA) since 2012
- Debt to Equity since 2012
- Total Asset Turnover since 2012
- Price to Book Value (P/BV) since 2012
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Return on Invested Capital (ROIC)
AbbVie Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2024 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of the data reveals several important trends related to profitability and capital efficiency over the five-year period ending December 31, 2024.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibits significant variability. It increased sharply from $4,455 million in 2020 to a peak of $12,362 million in 2021. Following this peak, NOPAT slightly decreased to $11,543 million in 2022, then experienced a substantial decline in 2023 to $3,292 million. In 2024, it showed some recovery, rising to $4,563 million, though still well below the earlier peak levels.
- Invested Capital
- There is a clear decreasing trend in invested capital over the period. Starting at $103,725 million in 2020, invested capital steadily declined each year, reaching $68,204 million in 2023. A slight increase occurred in 2024, bringing invested capital to $69,263 million. This reduction could reflect asset divestitures, capital optimization, or other strategic adjustments.
- Return on Invested Capital (ROIC)
- ROIC closely follows the fluctuations observed in NOPAT and invested capital. It rose significantly from 4.3% in 2020 to a peak of 14.05% in 2022, indicating improved capital efficiency. However, 2023 saw a sharp decrease to 4.83%, mirroring the fall in NOPAT, followed by a moderate increase to 6.59% in 2024. Despite recent declines, the ROIC levels in the later years remain higher than the initial 2020 figure.
Overall, the data indicate a period of strong profitability growth reaching its zenith in 2021-2022, accompanied by a continuous reduction in invested capital. The decline in both NOPAT and ROIC in 2023 suggests a challenging operational or market environment during that year, with partial recovery observed in 2024. The decreasing trend in invested capital alongside fluctuating returns highlights changing capital deployment strategies and varying effectiveness in generating profits from invested resources over the analyzed timeframe.
Decomposition of ROIC
AbbVie Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The financial data reveals several notable trends in operational efficiency, capital utilization, tax effectiveness, and overall returns during the five-year period.
- Operating Profit Margin (OPM)
- The operating profit margin increased significantly from 13.19% in 2020 to a peak of 27.06% in 2021, maintaining a similar level in 2022 at 26.77%. However, from 2022 onwards, there is a marked decline to 14.58% in 2023 and further down to 10.48% in 2024. This indicates that while the company initially improved its profit efficiency, recent years have seen considerable margin compression.
- Turnover of Capital (TO)
- The turnover of capital shows a steady upward trend over the period, rising from 0.44 in 2020 to 0.81 in 2024. This represents an improvement in the company's ability to generate sales from its invested capital, suggesting enhanced asset utilization or increased revenue generation relative to capital investment.
- Effective Cash Tax Rate (CTR) - 1 Minus CTR
- The inverse of the effective cash tax rate exhibits variability. It increased from 73.76% in 2020 to 81.3% in 2021, indicating lower cash tax payments relative to earnings. However, it declined in 2022 to 74.28%, plummeted to 41.58% in 2023, and then rose sharply to 77.32% in 2024. This volatility suggests fluctuating tax efficiencies or changes in tax planning strategies impacting the company's after-tax cash flow.
- Return on Invested Capital (ROIC)
- The ROIC demonstrates significant fluctuations throughout the five years. It improved markedly from 4.3% in 2020 to 12.89% in 2021 and further to 14.05% in 2022, reflecting growing profitability from invested capital. However, a steep drop to 4.83% in 2023 is noted, with a partial recovery to 6.59% in 2024. Such volatility could relate to changes in operating profit margin, capital turnover, or tax rate effects.
In summary, while capital efficiency as measured by turnover consistently improved, profitability margins and returns on invested capital showed strong growth initially but contracted sharply in later years. Additionally, the effective cash tax rate presented considerable variability, potentially affecting net returns. These mixed trends highlight areas requiring attention to stabilize profitability and maximize returns from invested capital.
Operating Profit Margin (OPM)
AbbVie Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
OPM = 100 × NOPBT ÷ Net revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data reveals several notable trends over the five-year period.
- Net operating profit before taxes (NOPBT)
- The NOPBT showed a significant increase from 6,040 million US dollars in 2020 to a peak of 15,540 million US dollars in 2022. However, this was followed by a considerable decline in 2023 to 7,917 million and further down to 5,902 million in 2024. This indicates a substantial contraction in profitability before taxes after 2022.
- Net revenues
- Net revenues exhibited a generally upward trend from 45,804 million US dollars in 2020 to 58,054 million in 2022, showing sustained growth in sales. Although there was a dip to 54,318 million in 2023, revenues recovered somewhat in 2024 to 56,334 million. Despite fluctuations, the overall revenue levels remain higher in the later years compared to the initial period.
- Operating profit margin (OPM)
- The operating profit margin followed a similar pattern to NOPBT, increasing sharply from 13.19% in 2020 to a high of around 27% in 2021 and 2022. After 2022, the margin decreased significantly, falling to 14.58% in 2023 and further down to 10.48% in 2024. This decline suggests diminishing operating efficiency or increasing costs relative to revenues in the later periods.
Overall, the data indicates strong operational performance and profitability improvements until 2022, followed by a marked downturn in operating profit despite relatively stable revenue figures. This suggests that factors other than revenue volume, such as cost management or external economic pressures, may have negatively impacted profitability after 2022.
Turnover of Capital (TO)
AbbVie Inc., TO calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Invested capital. See details »
2 2024 Calculation
TO = Net revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The financial data demonstrates several notable trends over the five-year period from 2020 to 2024. Net revenues exhibit a growth pattern, increasing from US$ 45,804 million in 2020 to a high of US$ 58,054 million in 2022. Although there is a dip in 2023 to US$ 54,318 million, net revenues recover slightly to US$ 56,334 million in 2024, maintaining an overall upward trajectory across the period.
Invested capital shows a consistent downward trend. Starting at US$ 103,725 million in 2020, it declines each year, reaching a low of US$ 68,204 million in 2023 before a minor increase to US$ 69,263 million in 2024. This reduction suggests a decrease in the capital base invested in the company's operations.
The turnover of capital ratio, which relates net revenues to invested capital, reflects efficiency improvements. It rises steadily from 0.44 in 2020 to 0.81 in 2024, indicating enhanced utilization of invested capital to generate revenues. The most notable increases occur between 2020 and 2022, with a more gradual ascent through 2024.
- Net Revenues
- Increased overall with a peak in 2022, slight decline in 2023, followed by partial recovery in 2024.
- Invested Capital
- Decreased consistently, suggesting reduced capital deployment, with a marginal rise in the final year.
- Turnover of Capital
- Improved significantly over the period, indicating better capital efficiency and revenue generation relative to invested capital.
Effective Cash Tax Rate (CTR)
AbbVie Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| Danaher Corp. | ||||||
| Eli Lilly & Co. | ||||||
| Gilead Sciences Inc. | ||||||
| Johnson & Johnson | ||||||
| Merck & Co. Inc. | ||||||
| Pfizer Inc. | ||||||
| Regeneron Pharmaceuticals Inc. | ||||||
| Thermo Fisher Scientific Inc. | ||||||
| Vertex Pharmaceuticals Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data exhibits significant fluctuations in key operational and tax metrics over the five-year period.
- Cash Operating Taxes
- The cash operating taxes paid generally increased from 1,585 million USD in 2020 to a peak of 4,625 million USD in 2023, marking a substantial rise. However, in 2024, there was a pronounced decline to 1,339 million USD, substantially lower than the previous four years. This pattern indicates volatility in tax payments, with a notable reduction in the latest period.
- Net Operating Profit Before Taxes (NOPBT)
- Net operating profit before taxes rose sharply from 6,040 million USD in 2020 to a high of 15,540 million USD in 2022, demonstrating strong profit growth in the first three years. Nevertheless, in 2023, this figure declined significantly to 7,917 million USD and further dropped to 5,902 million USD in 2024. This trend suggests a weakening in operating profitability after 2022.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate showed variability over the period. It decreased from 26.24% in 2020 to 18.7% in 2021, spiked to 25.72% in 2022, then experienced a sharp increase to 58.42% in 2023. Subsequently, it declined to 22.68% in 2024. These fluctuations imply changing tax obligations relative to operating profits, with a notably high tax burden impact in 2023 followed by normalization in the following year.