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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Caterpillar Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Selected Financial Data since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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Return on Invested Capital (ROIC)
Caterpillar 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 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 financial data reveals significant trends in operational profitability and capital efficiency over the examined five-year period.
- Net Operating Profit After Taxes (NOPAT)
- The company's NOPAT exhibits a robust upward trajectory, rising from 3,373 million US dollars in 2020 to 10,452 million US dollars in 2024. This growth suggests improving core operational performance, potentially driven by enhanced revenue generation, cost management, or both. Notably, the most substantial increase occurs between 2020 and 2021, doubling the profit, with steady gains continuing thereafter.
- Invested Capital
- The invested capital has remained relatively stable, fluctuating slightly within a narrow range from 54,026 million US dollars in 2020 to 57,519 million US dollars in 2024. This comparatively modest increase indicates that the company has maintained a consistent capital base while expanding profitability, signaling efficient utilization of assets and investments.
- Return on Invested Capital (ROIC)
- ROIC demonstrates a marked improvement, progressing from 6.24% in 2020 to 18.17% in 2024. This significant increase reflects enhanced capital efficiency and value creation, as the company is generating substantially higher returns on its invested capital over time. The escalation is particularly pronounced between 2020 and 2021 and continues to ascend steadily through to 2024.
In summary, the data indicates a company that has substantially increased its operating profitability and improved capital efficiency while maintaining a stable invested capital base. These trends are indicative of effective management strategies focused on maximizing returns and operational excellence over the analyzed period.
Decomposition of ROIC
Caterpillar 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 analysis of the financial ratios over the five-year period reveals several noteworthy trends.
- Operating Profit Margin (OPM)
- The operating profit margin demonstrates a general upward trend from 11.64% in 2020 to 22.35% in 2024. There is a significant increase between 2020 and 2021, rising by over 7 percentage points, followed by slight fluctuations but maintaining an overall positive trajectory. This indicates an improvement in operational efficiency and profitability over the period.
- Turnover of Capital (TO)
- Turnover of capital improves steadily from 0.72 in 2020 to a peak of 1.15 in 2023 before slightly declining to 1.07 in 2024. The initial steady increase suggests that the company enhanced its capital utilization and asset efficiency, although the slight decrease in the final year may warrant further attention to maintain this efficiency.
- 1 – Effective Cash Tax Rate (CTR)
- The measure of (1 – effective cash tax rate) remains relatively stable, fluctuating narrowly between approximately 74.3% and 76.22% during the period. This stability indicates consistent tax treatment and cash tax obligations over the years without significant tax planning impact or changes in effective tax rates.
- Return on Invested Capital (ROIC)
- Return on invested capital shows a strong upward trend, increasing from 6.24% in 2020 to 18.17% in 2024. The improvement is continuous and pronounced, nearly tripling over five years. This suggests enhanced overall profitability on capital employed, reflecting both higher operating margins and efficient use of capital.
Overall, the data indicate a company that has significantly improved its profitability and capital efficiency from 2020 through 2024. The steady increase in operating profit margin combined with enhanced turnover of capital and escalating ROIC point to successful operational and strategic management. The stable effective cash tax rate suggests consistent tax-related factors influencing cash flows throughout the period.
Operating Profit Margin (OPM)
Caterpillar 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) | ||||||
| Sales of Machinery, Energy & Transportation | ||||||
| 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: 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 ÷ Sales of Machinery, Energy & Transportation
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net operating profit before taxes (NOPBT)
- Over the five-year period, net operating profit before taxes exhibited a consistent upward trend. Beginning at $4,540 million in 2020, it more than doubled by 2021 to $9,200 million. Subsequent years saw continued growth, reaching $9,853 million in 2022, then surging to $13,382 million in 2023. In 2024, the profit further increased slightly to $13,712 million. This progression indicates strong profitability enhancement with particularly robust growth between 2020 and 2021, and again in 2023.
- Sales of Machinery, Energy & Transportation
- Sales revenues demonstrated a positive trend from 2020 through 2023, increasing steadily from $39,022 million to $63,869 million during this time frame. This represents steady expansion in sales activities. However, in 2024, there was a decline to $61,363 million, indicating a slight contraction after the previous years of growth. Despite this decrease, sales remained significantly elevated compared to the initial 2020 figure.
- Operating profit margin (OPM)
- Operating profit margin showed an overall increase throughout the period. It rose markedly from 11.64% in 2020 to 19.09% in 2021, reflecting improved operational efficiency and profitability. The margin dipped slightly to 17.42% in 2022, indicating some fluctuations possibly due to cost variations or pricing pressures. Nevertheless, the margin recovered and increased further to 20.95% in 2023 and 22.35% in 2024, reaching the highest level in the analyzed period. This trend suggests enhanced profitability and better control of operating expenses in recent years.
Turnover of Capital (TO)
Caterpillar Inc., TO calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Sales of Machinery, Energy & Transportation | ||||||
| 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: 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 = Sales of Machinery, Energy & Transportation ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Sales of Machinery, Energy & Transportation
- The sales figures demonstrate a consistent upward trend from 2020 to 2023, rising from 39,022 million US dollars to a peak of 63,869 million US dollars. However, in 2024, there is a slight decline to 61,363 million US dollars, indicating a potential stabilization or minor contraction after several years of strong growth.
- Invested capital
- The invested capital remains relatively stable over the five-year period, fluctuating within a narrow range. It starts at 54,026 million US dollars in 2020, experiences minor variations year-to-year, and ends at 57,519 million US dollars in 2024. This suggests a conservative approach to capital investment with no significant expansion or reduction.
- Turnover of capital (TO)
- The turnover of capital ratio shows a continuous improvement from 0.72 in 2020 to a high of 1.15 in 2023, reflecting increasing efficiency in utilizing invested capital to generate sales. In 2024, the ratio slightly decreases to 1.07, which may correlate with the dip in sales during the same period, but overall indicates a stronger use of capital compared to the earlier years.
Effective Cash Tax Rate (CTR)
Caterpillar 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 | ||||||
| Boeing Co. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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.
- Cash Operating Taxes
- The cash operating taxes show a consistent upward trend from 2020 to 2023, increasing from $1,167 million to $3,380 million. However, there is a slight decline in 2024 to $3,260 million. This indicates an overall increase in tax payments over the period, with a minor reduction in the most recent year.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT has demonstrated robust growth throughout the analyzed years. Starting at $4,540 million in 2020, it more than doubled by 2021 to $9,200 million, and continued to rise steadily through 2024, reaching $13,712 million. This consistent increase reflects improving operating performance before tax considerations.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate exhibits minor fluctuations but remains relatively stable over the period. It started at 25.7% in 2020, declined to a low of 23.78% in 2024, with some variability in between. This stability suggests consistent tax-related efficiency relative to operating profits.
- Overall Insights
- The financial data indicates that while operating profits before tax have grown significantly, tax expenses have also increased but at a slightly slower pace relative to profits, as reflected in the modest decline of the effective cash tax rate. The slight decrease in cash operating taxes in 2024 despite continued profit growth could imply improved tax management or changes in tax legislation or benefits.