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.
Return on Invested Capital (ROIC)
Devon Energy Corp., ROIC calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 7,447) | 3,160) | (2,522) | 57) | 1,250) | |
| Invested capital2 | 19,717) | 16,727) | 7,866) | 10,964) | 15,392) | |
| Performance Ratio | ||||||
| ROIC3 | 37.77% | 18.89% | -32.06% | 0.52% | 8.12% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Chevron Corp. | 19.68% | 10.04% | — | — | — | |
| ConocoPhillips | 28.02% | 13.45% | — | — | — | |
| ExxonMobil Holdings Corp. | 21.12% | 12.01% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 7,447 ÷ 19,717 = 37.77%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by extreme volatility, featuring a pronounced cyclical trough in 2020 followed by an aggressive recovery in both profitability and capital deployment.
- Net Operating Profit After Taxes (NOPAT)
- A significant contraction in NOPAT occurred between 2018 and 2020, moving from US$1,250 million to a deficit of US$2,522 million. This downward trajectory reversed sharply starting in 2021, with NOPAT climbing to US$3,160 million and peaking at US$7,447 million in 2022, reflecting a substantial restoration of operational profitability.
- Invested Capital
- The invested capital base underwent a period of contraction from 2018 to 2020, decreasing from US$15,392 million to US$7,866 million. This trend shifted abruptly in 2021, as invested capital expanded to US$16,727 million and continued to grow to US$19,717 million by the end of 2022, indicating a strategic shift toward increased capital investment.
- Return on Invested Capital (ROIC)
- ROIC mirrored the volatility of NOPAT, falling from 8.12% in 2018 to a low of -32.06% in 2020. A rapid recovery was observed in 2021, with the ratio rising to 18.89%. By 2022, ROIC reached 37.77%, representing a significant improvement in the efficiency of generating profits from the company's capital base compared to the start of the analyzed period.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Decomposition of ROIC
Devon Energy Corp., decomposition of ROIC
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The Return on Invested Capital (ROIC) exhibited extreme volatility over the five-year period, characterized by a severe contraction reaching a nadir in 2020 before experiencing a rapid and substantial recovery through 2022.
- Return on Invested Capital (ROIC)
- ROIC fluctuated from 8.12% in 2018 to a deep negative of -32.06% in 2020, eventually climbing to a period high of 37.77% by December 31, 2022. This trajectory indicates a cycle of significant financial distress followed by a strong phase of value creation.
- Operating Profit Margin (OPM)
- The OPM served as the primary catalyst for ROIC movements. A precipitous decline occurred between 2018 and 2020, with margins collapsing from 11.61% to -55.69%. Subsequently, a sharp reversal took place, with margins expanding to 42.13% in 2022, suggesting a dramatic improvement in operational profitability and cost management.
- Turnover of Capital (TO)
- Capital turnover remained more stable than margins but showed a consistent upward trend after 2019. The ratio increased from 0.57 in 2019 to 0.97 in 2022, indicating an improvement in the efficiency with which invested capital was utilized to generate revenue.
- Effective Cash Tax Rate Impact (1 - CTR)
- The tax component displayed irregularity, with a notable dip to 57.00% in 2019 before returning to 100.00% in 2020, likely as a result of operating losses eliminating tax liabilities. By 2022, the factor stood at 92.21%, reflecting a moderate tax impact on the final after-tax returns.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Operating Profit Margin (OPM)
Devon Energy Corp., OPM calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 7,447) | 3,160) | (2,522) | 57) | 1,250) | |
| Add: Cash operating taxes2 | 629) | 97) | (167) | 43) | (4) | |
| Net operating profit before taxes (NOPBT) | 8,076) | 3,257) | (2,689) | 99) | 1,246) | |
| Revenues | 19,169) | 12,206) | 4,828) | 6,220) | 10,734) | |
| Profitability Ratio | ||||||
| OPM3 | 42.13% | 26.69% | -55.69% | 1.60% | 11.61% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Chevron Corp. | 22.85% | 15.98% | — | — | — | |
| ConocoPhillips | 36.63% | 29.99% | — | — | — | |
| ExxonMobil Holdings Corp. | 19.95% | 14.69% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Revenues
= 100 × 8,076 ÷ 19,169 = 42.13%
4 Click competitor name to see calculations.
Analysis of the operating profit margin reveals a period of extreme volatility followed by a substantial recovery and expansion between 2018 and 2022.
- Revenue Trends
- A contraction in revenues is observed from 2018 to 2020, with figures falling from 10,734 million US$ to a low of 4,828 million US$. This downward trajectory reversed sharply in 2021 and 2022, culminating in a peak of 19,169 million US$, representing a significant increase over the 2018 baseline.
- Operating Profitability and NOPBT
- Net operating profit before taxes experienced a severe decline, transitioning from 1,246 million US$ in 2018 to a substantial loss of 2,689 million US$ in 2020. The subsequent recovery was rapid, with NOPBT reaching 8,076 million US$ by 2022, reflecting a strong rebound in operating performance.
- Operating Profit Margin (OPM) Dynamics
- The OPM exhibited a dramatic swing, plummeting from 11.61% in 2018 to -55.69% in 2020. This indicates a period where operating expenses significantly outweighed generated revenue. However, the margin expanded aggressively in the following two years, rising to 26.69% in 2021 and reaching 42.13% in 2022, demonstrating a marked improvement in operational efficiency and profitability.
The correlation between revenue growth and margin expansion suggests high operational leverage, as the increase in top-line revenue translated into a disproportionately larger increase in operating profit during the 2021-2022 period.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Turnover of Capital (TO)
Devon Energy Corp., TO calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenues | 19,169) | 12,206) | 4,828) | 6,220) | 10,734) | |
| Invested capital1 | 19,717) | 16,727) | 7,866) | 10,964) | 15,392) | |
| Efficiency Ratio | ||||||
| TO2 | 0.97 | 0.73 | 0.61 | 0.57 | 0.70 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Chevron Corp. | 1.11 | 0.80 | — | — | — | |
| ConocoPhillips | 1.04 | 0.60 | — | — | — | |
| ExxonMobil Holdings Corp. | 1.34 | 1.01 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 Invested capital. See details »
2 2022 Calculation
TO = Revenues ÷ Invested capital
= 19,169 ÷ 19,717 = 0.97
3 Click competitor name to see calculations.
An analysis of the financial performance between 2018 and 2022 reveals a period of significant volatility followed by a strong recovery in asset utilization and revenue generation. The company experienced a notable contraction in both revenues and invested capital during 2019 and 2020, which was subsequently countered by an aggressive growth phase in 2021 and 2022.
- Turnover of Capital (TO)
- The turnover of capital ratio exhibited a V-shaped trajectory over the five-year period. After starting at 0.70 in 2018, the ratio declined to a low of 0.57 in 2019, indicating a temporary decrease in the efficiency of capital deployment. However, a consistent upward trend emerged thereafter, with the ratio increasing to 0.61 in 2020, 0.73 in 2021, and peaking at 0.97 in 2022. This progression suggests a substantial improvement in the ability to generate sales from the invested capital base.
- Revenue and Capital Dynamics
- The volatility in the turnover ratio was closely tied to the fluctuations in revenues and invested capital. Between 2018 and 2020, revenues dropped from 10,734 million to 4,828 million, while invested capital was reduced from 15,392 million to 7,866 million. The recovery phase in 2021 and 2022 saw revenues surge to 19,169 million. While invested capital also increased to 19,717 million by 2022, the growth in revenue significantly outpaced the growth in capital, resulting in the observed expansion of the turnover ratio.
- Operational Efficiency Insight
- The increase in the turnover of capital to 0.97 by the end of 2022 indicates that the company nearly reached a 1:1 ratio of revenue to invested capital. This signifies a heightened state of operational efficiency compared to the 2019 low, reflecting a more effective conversion of capital investments into top-line growth.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Effective Cash Tax Rate (CTR)
Devon Energy Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 7,447) | 3,160) | (2,522) | 57) | 1,250) | |
| Add: Cash operating taxes2 | 629) | 97) | (167) | 43) | (4) | |
| Net operating profit before taxes (NOPBT) | 8,076) | 3,257) | (2,689) | 99) | 1,246) | |
| Tax Rate | ||||||
| CTR3 | 7.79% | 2.98% | — | 43.00% | -0.29% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Chevron Corp. | 22.40% | 21.79% | — | — | — | |
| ConocoPhillips | 26.41% | 25.25% | — | — | — | |
| ExxonMobil Holdings Corp. | 21.11% | 19.45% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 629 ÷ 8,076 = 7.79%
4 Click competitor name to see calculations.
The financial performance between 2018 and 2022 is characterized by extreme volatility in both operating profitability and tax obligations, reflecting significant fluctuations in the underlying business environment.
- Net Operating Profit Before Taxes (NOPBT) Trends
- NOPBT experienced a severe decline from 1,246 million USD in 2018 to a substantial loss of 2,689 million USD in 2020. This was followed by a rapid and aggressive recovery, with profits ascending to 3,257 million USD in 2021 and reaching a peak of 8,076 million USD by the end of 2022.
- Cash Operating Tax Dynamics
- Cash tax payments exhibited a direct correlation with operating profit swings. The company recorded negative cash taxes in 2018 and 2020, with the 2020 deficit reaching 167 million USD. As profitability returned, cash tax payments increased, culminating in a significant outflow of 629 million USD in 2022.
- Effective Cash Tax Rate (CTR) Analysis
- The CTR showed inconsistent behavior throughout the period. A notable spike to 43.00% occurred in 2019, despite a relatively low NOPBT of 99 million USD. Following the 2020 period of losses, the CTR remained disproportionately low relative to the surge in profits, recording 2.98% in 2021 and 7.79% in 2022.
The observed divergence between the massive growth in NOPBT and the relatively low effective cash tax rates in 2021 and 2022 suggests the strategic utilization of tax shields or the application of prior year loss carry-forwards to minimize immediate cash tax outflows during the recovery phase.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?