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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- Cash Flow Statement
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to Earnings (P/E) since 2005
- Price to Sales (P/S) since 2005
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Return on Invested Capital (ROIC)
Caterpillar Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates a generally positive trajectory in financial performance, as indicated by the Return on Invested Capital (ROIC). Net operating profit after taxes (NOPAT) and invested capital both experienced fluctuations, ultimately influencing the ROIC values.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased from US$6,986 million in 2021 to US$7,348 million in 2022, representing a modest gain. A significant increase is then observed, with NOPAT reaching US$10,002 million in 2023 and further rising to US$10,452 million in 2024. A slight decrease is noted in 2025, with NOPAT reported at US$9,805 million. This suggests strong operational profitability, with a recent leveling off.
- Invested Capital
- Invested capital decreased slightly from US$55,552 million in 2021 to US$54,801 million in 2022. It then stabilized around US$55,518 million in 2023 before increasing to US$57,519 million in 2024. A more substantial increase is observed in 2025, with invested capital reaching US$64,653 million. This indicates growing capital deployment within the business.
- Return on Invested Capital (ROIC)
- ROIC exhibited an upward trend from 12.58% in 2021 to 13.41% in 2022. This positive momentum continued with a substantial increase to 18.02% in 2023 and a slight further improvement to 18.17% in 2024. A decrease is then observed in 2025, with ROIC falling to 15.17%. The initial increases in ROIC suggest improved efficiency in capital utilization, while the 2025 decline may be attributed to the larger increase in invested capital outpacing the NOPAT growth.
Overall, the period demonstrates a strong performance in generating returns on invested capital, peaking in 2024. The decrease in ROIC in 2025 warrants further investigation to determine the sustainability of capital deployment and its impact on future profitability.
Decomposition of ROIC
Caterpillar Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2025 | = | × | × | ||||
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × |
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The period under review demonstrates fluctuating performance in key profitability and efficiency metrics. Return on Invested Capital (ROIC) exhibited an overall increase initially, followed by a decline in the most recent year presented. This fluctuation is attributable to changes in operating profitability, capital efficiency, and the impact of taxes.
- Operating Profit Margin (OPM)
- The Operating Profit Margin initially decreased from 19.09% in 2021 to 17.42% in 2022. A subsequent recovery was observed, with the margin increasing to 20.95% in 2023 and peaking at 22.35% in 2024. However, the most recent year, 2025, shows a decline to 18.96%. This suggests a sensitivity to external factors or internal cost management strategies that vary year to year.
- Turnover of Capital (TO)
- The Turnover of Capital ratio shows an improving trend from 0.87 in 2021 to 1.15 in 2023, indicating increasing efficiency in asset utilization. However, this trend reversed in 2024 and 2025, with the ratio decreasing to 1.07 and then 0.99 respectively. This suggests a potential slowdown in the generation of revenue from each unit of capital employed in the latter years.
- Effective Cash Tax Rate Adjustment (1 – CTR)
- The factor representing one minus the Effective Cash Tax Rate remained relatively stable between 2021 and 2024, fluctuating between 74.58% and 76.22%. A notable increase to 80.82% is observed in 2025. This indicates a higher proportion of after-tax profit retained in the most recent year, potentially due to changes in tax regulations or tax planning strategies.
- Return on Invested Capital (ROIC)
- ROIC increased from 12.58% in 2021 to 13.41% in 2022, and then experienced a more substantial increase to 18.02% in 2023 and 18.17% in 2024. The final year, 2025, shows a decrease to 15.17%. The initial increases in ROIC correlate with improvements in both Operating Profit Margin and Turnover of Capital. The decline in 2025 is likely attributable to the combined effect of a lower Operating Profit Margin and Turnover of Capital, partially offset by the increased tax benefit factor.
The interplay between these factors suggests that while operational efficiency and profitability have generally improved, recent performance indicates potential challenges in maintaining these gains. The increase in the tax benefit factor in 2025 provides some mitigation, but the overall ROIC decline warrants further investigation.
Operating Profit Margin (OPM)
Caterpillar Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Sales of Machinery, Power & Energy | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Sales of Machinery, Power & Energy
= 100 × ÷ =
4 Click competitor name to see calculations.
The operating profit margin exhibited a fluctuating trend over the five-year period. Net operating profit before taxes increased from 2021 to 2023, followed by a slight decrease in 2024 and a more pronounced decrease in 2025. Sales of Machinery, Power & Energy also generally increased, with a peak in 2023, a slight decline in 2024, and a return to growth in 2025.
- Operating Profit Margin (OPM)
- The operating profit margin began at 19.09% in 2021. A decrease to 17.42% was observed in 2022. The margin then increased significantly to 20.95% in 2023, reaching its highest point during the analyzed period. Further improvement occurred in 2024, with the margin reaching 22.35%. However, 2025 saw a decline to 18.96%, representing a substantial decrease from the previous year’s value.
The relationship between net operating profit before taxes and sales suggests that while sales generally increased, the rate of profit generation relative to sales varied. The peak in operating profit margin in 2024, despite a slight decrease in sales compared to 2023, indicates improved operational efficiency or pricing power during that year. The subsequent decline in margin in 2025, coupled with increased sales, suggests potential cost pressures or a shift in the sales mix towards lower-margin products.
- Net Operating Profit Before Taxes (NOPBT) & Sales Correlation
- From 2021 to 2023, NOPBT increased in tandem with sales, contributing to the rising OPM. The divergence in 2024 and 2025, where sales continued to rise but NOPBT plateaued and then declined, directly impacted the OPM, demonstrating that sales growth alone does not guarantee margin expansion.
The fluctuations in operating profit margin warrant further investigation to determine the underlying drivers. Factors such as changes in input costs, competitive pressures, product mix, and operational efficiencies should be considered to understand the observed trends.
Turnover of Capital (TO)
Caterpillar Inc., TO calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales of Machinery, Power & Energy | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Invested capital. See details »
2 2025 Calculation
TO = Sales of Machinery, Power & Energy ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The turnover of capital exhibited a generally increasing trend from 2021 to 2023, followed by a stabilization and slight decline in subsequent years. Sales of Machinery, Power & Energy demonstrated consistent growth initially, while invested capital fluctuated over the period.
- Turnover of Capital (TO)
- The turnover of capital ratio increased from 0.87 in 2021 to 1.15 in 2023, indicating improving efficiency in generating sales from invested capital. This suggests the company became more effective at utilizing its capital base to drive revenue during this timeframe. However, the ratio decreased to 1.07 in 2024 and further to 0.99 in 2025, signaling a potential slowdown in capital utilization efficiency. While still above the 2021 level, the recent decline warrants further investigation.
- Sales of Machinery, Power & Energy
- Sales increased from US$48,188 million in 2021 to US$63,869 million in 2023, representing substantial growth. The rate of sales growth slowed in 2024, with a decrease to US$61,363 million, before a modest recovery to US$63,980 million in 2025. This suggests potential market saturation or increased competition impacting sales momentum in the latter years.
- Invested Capital
- Invested capital decreased slightly from US$55,552 million in 2021 to US$54,801 million in 2022. It then experienced a slight increase to US$55,518 million in 2023, followed by a more noticeable increase to US$57,519 million in 2024 and US$64,653 million in 2025. The increasing invested capital in the later years, coupled with the stabilization of sales, likely contributed to the observed decline in the turnover of capital ratio.
The combined effect of sales fluctuations and changes in invested capital resulted in the observed trend in the turnover of capital. The initial improvement in TO was driven by stronger sales growth relative to invested capital, while the subsequent decline appears linked to increased capital investment without a corresponding increase in sales.
Effective Cash Tax Rate (CTR)
Caterpillar Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The effective cash tax rate exhibited fluctuations over the five-year period. Cash operating taxes and net operating profit before taxes both generally increased, though with some variation year-over-year. The relationship between these two items resulted in a changing effective cash tax rate.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate began at 24.06% in 2021, increasing to 25.42% in 2022. A slight decrease to 25.26% was observed in 2023. The rate then declined to 23.78% in 2024 before a more substantial decrease to 19.18% in 2025. This represents the most significant change in the observed period.
Net operating profit before taxes increased from US$9,200 million in 2021 to US$13,382 million in 2023, representing substantial growth. While it decreased slightly to US$13,712 million in 2024, it remained elevated before falling to US$12,132 million in 2025. This suggests profitability was strong overall, but experienced some volatility.
Cash operating taxes followed a similar pattern of growth and decline. Starting at US$2,213 million in 2021, they rose to US$3,380 million in 2023. A small decrease to US$3,260 million occurred in 2024, followed by a more pronounced decrease to US$2,327 million in 2025. The decrease in cash taxes in 2025, coupled with the decrease in NOPBT, contributed to the significant drop in the effective cash tax rate.
- Relationship between NOPBT and Cash Taxes
- The increase in the effective cash tax rate from 2021 to 2022 occurred alongside increases in both net operating profit before taxes and cash operating taxes. The rate stabilized in 2023, indicating a proportional relationship between the two. The subsequent decline in the rate in 2024 and 2025 suggests that cash taxes did not decrease as rapidly as NOPBT, or that NOPBT decreased more significantly than cash taxes, resulting in a lower percentage.
The substantial decrease in the effective cash tax rate in 2025 warrants further investigation to determine the underlying drivers, such as changes in tax regulations, tax planning strategies, or the utilization of tax loss carryforwards.