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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Danaher Corp. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Aggregate Accruals
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Return on Invested Capital (ROIC)
Danaher Corp., 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 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| 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 financial performance over the analyzed periods reveals notable fluctuations and trends concerning profitability and capital efficiency.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT exhibited an upward trend from 2020 to 2022, increasing from 4,986 million US dollars in 2020 to a peak of 6,866 million US dollars in 2022. However, this positive momentum reversed in 2023, with a sharp decline to 3,099 million US dollars, followed by a slight recovery to 3,391 million US dollars in 2024. This significant drop after 2022 suggests challenges in sustaining operating profitability.
- Invested Capital
- Invested capital steadily increased from 67,123 million US dollars in 2020 to 78,561 million US dollars in 2023 before decreasing to 73,131 million US dollars in 2024. The initial rise indicates ongoing investment or asset accumulation, while the decline in the final period may reflect asset disposals, write-downs, or capital restructuring activities.
- Return on Invested Capital (ROIC)
- The ROIC improved from 7.43% in 2020 to 9.01% in 2021, maintaining a relatively high level of 8.76% in 2022. Nevertheless, it markedly decreased to 3.94% in 2023, coinciding with the decline in NOPAT, and experienced a modest recovery to 4.64% in 2024. This pattern indicates a reduction in operational efficiency and profitability relative to invested capital after 2022, followed by a partial improvement.
In summary, the period shows an initial phase of growth and improved returns until 2022, succeeded by a pronounced contraction in profit generation and capital efficiency. The data suggest potential operational challenges or market conditions that impacted performance in 2023, with early signs of stabilization in 2024.
Decomposition of ROIC
Danaher Corp., 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 over the five-year period from 2020 to 2024.
- Operating Profit Margin (OPM)
-
The operating profit margin showed an initial increase from 23.43% in 2020 to a peak of 27.65% in 2021, maintaining a similar level in 2022 at 27.12%. However, this margin experienced a significant decline thereafter, dropping to 21.44% in 2023 and further to 19.69% in 2024. This suggests that profitability from operations became less efficient or more costly in the most recent years.
- Turnover of Capital (TO)
-
The turnover of capital increased from 0.34 in 2020 to 0.40 in 2021 and remained steady at 0.40 in 2022. Subsequently, there was a decline to 0.30 in 2023, with a slight recovery to 0.32 in 2024. This pattern indicates some improvement in capital utilization initially but a drop in asset efficiency in the latter years, with only modest improvement thereafter.
- Effective Cash Tax Rate (1 - CTR)
-
The effective cash tax rate, expressed here as one minus the tax rate, decreased consistently from 92.93% in 2020 to 81.42% in 2021 and remained relatively stable at 80.31% in 2022. It then fell sharply to 60.40% in 2023 before recovering partially to 72.69% in 2024. This trend indicates an increasing tax burden or reduced tax efficiency starting in 2023, with some amelioration in the most recent year.
- Return on Invested Capital (ROIC)
-
The return on invested capital improved from 7.43% in 2020 to 9.01% in 2021, remaining close at 8.76% in 2022. However, there was a steep decline in 2023 to 3.94%, followed by a slight recovery to 4.64% in 2024. This suggests that the company's ability to generate returns from its invested capital suffered significantly in recent years and has yet to regain prior performance levels.
Overall, the data indicates strong operational profitability and capital efficiency during the early years, peaking around 2021 and 2022, with marked deterioration from 2023 onward. Increased tax burdens and decreased returns on investment capital have negatively impacted overall financial performance in the latter period. Although some marginal recovery is visible in 2024, the company appears to be facing challenges in maintaining both profitability and capital utilization at former levels.
Operating Profit Margin (OPM)
Danaher Corp., 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 | ||||||
| Add: Increase (decrease) in contract liabilities | ||||||
| Adjusted sales | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| 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 ÷ Adjusted sales
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT showed a consistent increase from 2020 to 2022, rising from 5,365 million US dollars in 2020 to a peak of 8,550 million US dollars in 2022. However, it declined notably in the subsequent periods, dropping to 5,131 million US dollars in 2023 and further to 4,665 million US dollars in 2024. This suggests a significant deterioration in operating profitability in the latest two years.
- Adjusted Sales
- Adjusted sales followed an upward trend between 2020 and 2022, increasing from 22,895 million US dollars to 31,528 million US dollars. Despite this growth, sales decreased substantially in 2023 to 23,927 million US dollars and remained relatively flat in 2024 at 23,692 million US dollars. This reflects a contraction in sales volume or pricing after 2022.
- Operating Profit Margin (OPM)
- The operating profit margin rose from 23.43% in 2020 to a high of 27.65% in 2021, maintaining a similar level at 27.12% in 2022. Afterwards, it exhibited a clear downward trend, falling to 21.44% in 2023 and further to 19.69% in 2024. The margin decline aligns with the reduction in both NOPBT and adjusted sales, indicating decreasing efficiency or increasing costs relative to sales in recent years.
Turnover of Capital (TO)
Danaher Corp., 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 | ||||||
| Add: Increase (decrease) in contract liabilities | ||||||
| Adjusted sales | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| 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 = Adjusted sales ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The annual financial data reveals several notable trends in key financial metrics over the five-year period.
- Adjusted Sales
- Adjusted sales showed a significant upward trend from 2020 to 2022, increasing from $22,895 million in 2020 to a peak of $31,528 million in 2022. However, this growth reversed in the subsequent years, with sales declining sharply to $23,927 million in 2023 and slightly further to $23,692 million in 2024. The decline after 2022 may indicate market challenges, changes in demand, or other external factors impacting revenue.
- Invested Capital
- Invested capital displayed a consistent increase from 2020 through 2023, moving from $67,123 million to $78,561 million. This growth suggests expansion or increased investment in assets during these years. However, in 2024, invested capital decreased to $73,131 million, reflecting a possible divestment, depreciation, or reallocation of resources.
- Turnover of Capital (TO)
- Turnover of capital, which measures the efficiency of utilizing capital to generate sales, improved from 0.34 in 2020 to 0.40 in 2021 and remained stable at 0.40 in 2022. This stability coincides with the rise in adjusted sales and invested capital. From 2022 onwards, TO ratio declined, dropping to 0.30 in 2023 and slightly recovering to 0.32 in 2024. This indicates a decrease in capital efficiency during the latter period, possibly related to the decline in sales not being matched by a similar reduction in capital.
In summary, the data reflects a phase of sales growth and capital investment up to 2022, followed by a downturn in sales and a reduction in invested capital in the following years. The turnover ratio trends suggest a corresponding decline in the efficiency of capital utilization after 2022, highlighting potential operational or market challenges impacting performance.
Effective Cash Tax Rate (CTR)
Danaher Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 | ||||||
| AbbVie Inc. | ||||||
| Amgen Inc. | ||||||
| Bristol-Myers Squibb Co. | ||||||
| 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.
- Cash Operating Taxes
- The cash operating taxes show a significant increase from 380 million US dollars in 2020 to a peak of 2032 million US dollars in 2023. However, in 2024, there is a considerable decline to 1274 million US dollars. This pattern indicates an overall upward trend in cash taxes until 2023, followed by a sharp decrease in the last recorded year.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes experienced growth from 5365 million US dollars in 2020 to reach a high of 8550 million US dollars in 2022. This was followed by a notable decrease over the next two years, falling to 5131 million US dollars in 2023 and further declining to 4665 million US dollars in 2024. The data suggest a peak in operating profitability in 2022 with subsequent weakening in the following years.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate shows an increasing trend from 7.07% in 2020 to a maximum of 39.6% in 2023. After this peak, the tax rate decreases to 27.31% in 2024. This indicates a substantial rise in the proportion of operating profits paid as cash taxes up to 2023, with some relief observed in the final year.
- Overall Analysis
- The data reveals a general correlation between the effective cash tax rate and cash operating taxes, both increasing until 2023. However, the sharp decline in NOPBT starting from 2023, alongside the reduced cash operating taxes and tax rate in 2024, suggests possible changes in either the company's profitability or tax environment in recent years. The decline in profitability coupled with a lower tax rate and reduced cash taxes in 2024 points to a potentially less favorable operating performance but improved tax efficiency or tax liabilities in the latest period.