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
- Analysis of Profitability Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Geographic Areas
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Current Ratio since 2005
- Price to Book Value (P/BV) since 2005
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Return on Invested Capital (ROIC)
EMC Corp., ROIC calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2015 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes shows a fluctuating trend over the five-year period. It remains relatively stable from 2011 to 2013, with values of 4267 million, 4279 million, and 4442 million US dollars respectively. However, a decline is observed starting in 2014, with a significant decrease to 3737 million and further dropping to 2862 million by the end of 2015.
- Invested Capital
- The invested capital exhibits a consistent upward trajectory throughout the period. Beginning at 24594 million US dollars in 2011, it rises steadily each year, reaching 27392 million in 2012, 31439 million in 2013, 32268 million in 2014, and culminating at 33788 million in 2015. This indicates ongoing investment or accumulation of capital assets.
- Return on Invested Capital (ROIC)
- The return on invested capital reflects a clear declining trend. Starting from a high of 17.35% in 2011, the ROIC decreases each year to 15.62% in 2012, 14.13% in 2013, 11.58% in 2014, and finally 8.47% in 2015. This decline suggests reduced efficiency or profitability in generating returns from the invested capital over time.
- Overall Analysis
- While invested capital has been growing steadily, net operating profit after taxes has declined notably in the latter years. This divergence contributes to the decreasing return on invested capital, signaling potential challenges in maintaining profitability relative to capital invested. The erosion in ROIC could be indicative of increased costs, lower operating margins, or diminishing revenues in relation to the growing capital base.
Decomposition of ROIC
EMC Corp., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2015 | = | × | × | ||||
| Dec 31, 2014 | = | × | × | ||||
| Dec 31, 2013 | = | × | × | ||||
| Dec 31, 2012 | = | × | × | ||||
| Dec 31, 2011 | = | × | × |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin demonstrates a consistent downward trend over the five-year period. Beginning at 23.26% in 2011, it remains relatively stable through 2012 at 23.23%, before gradually declining to 22.23% in 2013. The decline accelerates from 2014 onwards, reaching 19.69% and further dropping to 15.21% by 2015. This pattern suggests decreasing operational efficiency or increased costs impacting profitability over time.
- Turnover of Capital (TO)
- Turnover of capital shows a gradual decline across the reviewed periods. Starting at a ratio of 0.87 in 2011, it slightly decreases to 0.84 in 2012 and continues its descent to 0.78 in 2013. The ratio stabilizes somewhat in 2014 at 0.79 but declines again to 0.75 by 2015. This trend indicates a reduction in the frequency with which invested capital is generating sales, reflecting potentially less efficient asset utilization.
- 1 – Effective Cash Tax Rate (CTR)
- The effective cash tax rate, expressed as 1 minus the CTR, fluctuates but generally trends downwards from 85.24% in 2011 to 74.27% in 2015. Notably, the value declines steadily with brief upticks in 2013. This decrease implies that the company's effective cash tax burden is increasing, diminishing the proportion of pre-tax earnings retained after taxes.
- Return on Invested Capital (ROIC)
- The return on invested capital reveals a clear and continuous decline throughout the period, decreasing markedly from 17.35% in 2011 to 8.47% in 2015. This suggests a weakening ability to generate returns from capital investments, possibly linked to the combined effects of decreasing operating profit margin and turnover of capital. The reduction in ROIC highlights a concern regarding overall capital efficiency and profitability.
Operating Profit Margin (OPM)
EMC Corp., OPM calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2015 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT shows an initial upward trend from 2011 to 2013, rising from 5005 million US dollars to a peak of 5481 million in 2013. After this peak, a decline is noted in subsequent years, with profits decreasing to 5046 million in 2014 and further dropping to 3854 million in 2015. This pattern indicates a weakening in profitability before taxes in the latter years.
- Adjusted Revenues
- Revenues exhibited consistent growth from 2011 through 2014, increasing steadily from 21518 million US dollars to 25626 million. However, in 2015, there is a slight decrease to 25341 million, suggesting a plateau or mild contraction in revenue generation during that year.
- Operating Profit Margin (OPM)
- The operating profit margin remained relatively stable around 23% in the initial years, specifically in 2011 and 2012. A declining trend is evident from 2013 onward, with the margin dropping progressively to 22.23% in 2013, 19.69% in 2014, and reaching a low of 15.21% in 2015. This suggests reduced operational efficiency or increased costs impacting profitability.
- Overall Financial Performance
- Despite a growth in revenues during the first four years, profitability as reflected in both net operating profit before taxes and operating profit margin has declined from 2013 onwards. The divergence between revenue trends and profit margins indicates potential challenges in cost control or market conditions affecting profit sustainability.
Turnover of Capital (TO)
EMC Corp., TO calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Invested capital. See details »
2 2015 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenues
- The adjusted revenues exhibit a consistent upward trend from 2011 to 2014, increasing from 21,518 million US dollars in 2011 to a peak of 25,626 million US dollars in 2014. However, there is a slight decline observed in 2015, with revenues decreasing marginally to 25,341 million US dollars. Overall, revenues grew steadily over the period with a minor setback in the final year.
- Invested Capital
- Invested capital shows a continuous and significant increase throughout the five-year period. Starting at 24,594 million US dollars in 2011, it rises steadily each year, reaching 33,788 million US dollars by the end of 2015. This indicates ongoing investments in assets or resources over time, potentially aimed at supporting growth or expanding capacity.
- Turnover of Capital (TO)
- The turnover of capital ratio, which measures how efficiently the invested capital is generating revenue, exhibits a downward trend over the period. It decreases from 0.87 in 2011 to 0.75 in 2015. This decline suggests that while invested capital has been increasing, the efficiency in generating revenues from that capital has diminished, indicating lower capital productivity.
- Overall Analysis
- The data reveals that the company has experienced growth in revenues and expansion in invested capital between 2011 and 2015. Nevertheless, the declining turnover of capital ratio suggests that the increased capital base is not being utilized as effectively to generate additional revenues. This pattern could imply potential inefficiencies or diminishing returns on invested capital, warranting further investigation into capital allocation and operational efficiency.
Effective Cash Tax Rate (CTR)
EMC Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| 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 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2015 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes exhibit a fluctuating pattern over the analyzed period. Initially, there is a considerable increase from 739 million US dollars in 2011 to 1,085 million US dollars in 2012. This is followed by a slight decrease in 2013 to 1,038 million, then a rise again in 2014 to 1,309 million. However, in 2015, the cash operating taxes decline to 992 million. Overall, the cash tax payments show volatility with a peak in 2014.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes demonstrates some volatility and a general downward trend towards the end of the period. The figure starts at 5,005 million US dollars in 2011, increases moderately to 5,364 million in 2012, and slightly rises further to 5,481 million in 2013. However, in 2014 the profit declines to 5,046 million and drops sharply in 2015 to 3,854 million, indicating a significant reduction in operational profitability before taxes during the final year.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate shows an overall increasing trend with some variability. Starting from 14.76% in 2011, there is a notable rise in 2012 to 20.23%, followed by a moderate decline to 18.94% in 2013. Subsequently, the rate escalates significantly to 25.94% in 2014 and remains at a similar level (25.73%) in 2015. This trend suggests a rising tax burden relative to the cash operating profits over the latter years.
- Overall Insights
- The financial data reveals that while the net operating profit before taxes increased slightly up to 2013, it experienced a decline thereafter, culminating in a pronounced drop in 2015. The cash operating taxes followed a somewhat erratic pattern, peaking in 2014 before dropping in 2015. The effective cash tax rate increased significantly from 2011 to 2014 and remained elevated in 2015, indicating growing tax pressure on the company’s operating earnings. The simultaneous reduction in profit and relatively high tax rate in 2015 suggests a potentially tighter profitability environment influenced by tax expenses.