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)
Eaton Corp. plc, 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 | 3,854) | 3,310) | 2,473) | 2,328) | 1,541) | |
| Invested capital2 | 31,924) | 31,576) | 30,906) | 29,709) | 27,450) | |
| Performance Ratio | ||||||
| ROIC3 | 12.07% | 10.48% | 8.00% | 7.84% | 5.61% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | -20.37% | -0.17% | -5.73% | -5.36% | -17.44% | |
| Caterpillar Inc. | 18.17% | 18.02% | 13.41% | 12.58% | 6.24% | |
| GE Aerospace | 20.07% | 20.95% | 2.73% | -2.53% | 5.22% | |
| Honeywell International Inc. | 9.91% | 12.37% | 11.54% | 12.33% | 10.94% | |
| Lockheed Martin Corp. | 18.98% | 25.46% | 21.60% | 22.51% | 25.67% | |
| RTX Corp. | 5.82% | 3.68% | 4.11% | 4.41% | -1.38% | |
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 × 3,854 ÷ 31,924 = 12.07%
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes demonstrated a consistent upward trend over the five-year period. Beginning at 1,541 million US dollars at the end of 2020, it increased significantly each year, reaching 3,854 million US dollars by the end of 2024. This represents more than a doubling of NOPAT, indicating improving operational profitability and effectiveness in generating earnings from operational activities.
- Invested Capital
- Invested capital also exhibited growth but at a notably slower pace compared to NOPAT. It rose from 27,450 million US dollars in 2020 to 31,924 million US dollars in 2024. The incremental increases suggest a moderate expansion in capital investment or asset base over the period, indicating controlled or measured capital deployment.
- Return on Invested Capital (ROIC)
- The return on invested capital showed a strong upward trajectory, improving from 5.61% in 2020 to 12.07% in 2024. This substantial increase reflects a growing efficiency in the company’s use of its invested capital to generate profit. The improvement in ROIC aligns with the significant rise in NOPAT relative to the slower growth in invested capital, suggesting enhanced operational performance and capital utilization over time.
- Overall Analysis
- The data indicates robust financial improvements with increasing profitability and efficient use of capital. The disproportionate growth between NOPAT and invested capital results in an increased ROIC, signaling that the company is generating higher returns on its investments. This pattern reflects positively on management’s ability to grow earnings while controlling capital expenditure, thereby creating value for stakeholders over the observed period.
Decomposition of ROIC
Eaton Corp. plc, decomposition of ROIC
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 »
- Operating Profit Margin (OPM)
- The operating profit margin shows a consistent upward trend from 11.4% in 2020 to 19.37% in 2024. After a significant increase from 11.4% in 2020 to 15.9% in 2021, the margin slightly dipped to 14.81% in 2022 but then resumed growth in the following years, reaching its highest level in 2024. This indicates improving operational efficiency and profitability over the period.
- Turnover of Capital (TO)
- The turnover of capital ratio demonstrates a gradual increase from 0.65 in 2020 to 0.78 in 2024. The increase is steady and moderate, reflecting an enhanced ability to generate sales from the invested capital. The most notable acceleration occurred between 2022 and 2024, suggesting better utilization of capital resources in recent years.
- Effective Cash Tax Rate (1 - CTR)
- The metric representing one minus the effective cash tax rate remains relatively stable, fluctuating around the mid-70s to 80% range. Starting at 75.61% in 2020, it slightly declined to 73.98% in 2021 before increasing to around 80% from 2022 onward. This stability implies minimal changes in the effective tax rate impacting cash flows during the analyzed period.
- Return on Invested Capital (ROIC)
- The return on invested capital exhibits a strong positive trend, increasing from 5.61% in 2020 to 12.07% in 2024. The steady growth, especially pronounced after 2021, signals enhanced efficiency in generating returns from invested funds. The ROIC nearly doubled over the five-year span, indicating significant improvement in value creation for investors.
Operating Profit Margin (OPM)
Eaton Corp. plc, 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 | 3,854) | 3,310) | 2,473) | 2,328) | 1,541) | |
| Add: Cash operating taxes2 | 964) | 830) | 614) | 819) | 497) | |
| Net operating profit before taxes (NOPBT) | 4,818) | 4,141) | 3,086) | 3,147) | 2,038) | |
| Net sales | 24,878) | 23,196) | 20,752) | 19,628) | 17,858) | |
| Add: Increase (decrease) in deferred revenue liabilities | (8) | 118) | 86) | 165) | 23) | |
| Adjusted net sales | 24,870) | 23,314) | 20,838) | 19,793) | 17,881) | |
| Profitability Ratio | ||||||
| OPM3 | 19.37% | 17.76% | 14.81% | 15.90% | 11.40% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | -14.62% | 0.85% | -3.49% | -3.17% | -20.02% | |
| Caterpillar Inc. | 22.35% | 20.95% | 17.42% | 19.09% | 11.64% | |
| GE Aerospace | 24.39% | 17.53% | 4.46% | -2.35% | 12.65% | |
| Honeywell International Inc. | 20.31% | 20.28% | 19.83% | 21.58% | 20.40% | |
| Lockheed Martin Corp. | 10.03% | 13.04% | 11.60% | 11.85% | 13.19% | |
| RTX Corp. | 10.06% | 7.71% | 10.88% | 9.65% | -1.08% | |
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 net sales
= 100 × 4,818 ÷ 24,870 = 19.37%
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes showed a consistent upward trend over the five-year period. Starting at US$ 2,038 million in 2020, it increased significantly to US$ 4,818 million by the end of 2024. The largest growth increments were observed between 2020 and 2021, and again from 2022 to 2023, indicating periods of enhanced operational efficiency or increased revenue generation.
- Adjusted Net Sales
- The adjusted net sales demonstrated steady growth throughout the period, rising from US$ 17,881 million in 2020 to US$ 24,870 million in 2024. This consistent increase suggests ongoing expansion in sales volume or pricing power. The year-on-year growth appears moderate but stable, reflecting sustained demand or improved market presence.
- Operating Profit Margin (OPM)
- The operating profit margin exhibited a clear upward trend, moving from 11.4% in 2020 to 19.37% in 2024. This improvement implies enhanced profitability efficiency, possibly due to better cost management, operational improvements, or a favorable sales mix. The margins show notable increases particularly between 2021 and 2023, aligning with the periods of significant profit growth.
Turnover of Capital (TO)
Eaton Corp. plc, 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) | ||||||
| Net sales | 24,878) | 23,196) | 20,752) | 19,628) | 17,858) | |
| Add: Increase (decrease) in deferred revenue liabilities | (8) | 118) | 86) | 165) | 23) | |
| Adjusted net sales | 24,870) | 23,314) | 20,838) | 19,793) | 17,881) | |
| Invested capital1 | 31,924) | 31,576) | 30,906) | 29,709) | 27,450) | |
| Efficiency Ratio | ||||||
| TO2 | 0.78 | 0.74 | 0.67 | 0.67 | 0.65 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | 1.32 | 1.73 | 1.31 | 1.26 | 1.22 | |
| Caterpillar Inc. | 1.07 | 1.15 | 1.03 | 0.87 | 0.72 | |
| GE Aerospace | 0.93 | 1.29 | 1.10 | 0.99 | 0.63 | |
| Honeywell International Inc. | 0.64 | 0.76 | 0.76 | 0.72 | 0.67 | |
| Lockheed Martin Corp. | 2.47 | 2.46 | 2.48 | 2.34 | 2.33 | |
| RTX Corp. | 0.73 | 0.62 | 0.59 | 0.56 | 0.49 | |
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 net sales ÷ Invested capital
= 24,870 ÷ 31,924 = 0.78
3 Click competitor name to see calculations.
- Adjusted Net Sales
- Adjusted net sales have demonstrated a consistent upward trend over the five-year period. Starting at $17,881 million in 2020, sales increased annually to reach $24,870 million by 2024. This represents a compound growth indicative of expanding revenue generation capacity.
- Invested Capital
- The invested capital also exhibited growth, albeit at a more moderate pace compared to net sales. From $27,450 million in 2020, it rose steadily to $31,924 million in 2024. The incremental increases suggest ongoing investment in assets to support operational activities.
- Turnover of Capital (TO)
- The turnover of capital ratio improved notably during the period. Beginning at 0.65 in 2020, it remained relatively flat through 2021 and 2022 before climbing more significantly to 0.74 in 2023 and 0.78 in 2024. This upward movement indicates enhanced efficiency in utilizing invested capital to generate sales, reflecting more effective asset use over time.
Effective Cash Tax Rate (CTR)
Eaton Corp. plc, CTR calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,854) | 3,310) | 2,473) | 2,328) | 1,541) | |
| Add: Cash operating taxes2 | 964) | 830) | 614) | 819) | 497) | |
| Net operating profit before taxes (NOPBT) | 4,818) | 4,141) | 3,086) | 3,147) | 2,038) | |
| Tax Rate | ||||||
| CTR3 | 20.00% | 20.06% | 19.89% | 26.02% | 24.39% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Boeing Co. | — | 111.76% | — | — | — | |
| Caterpillar Inc. | 23.78% | 25.26% | 25.42% | 24.06% | 25.70% | |
| GE Aerospace | 11.67% | 7.01% | 44.47% | — | 34.06% | |
| Honeywell International Inc. | 23.60% | 19.41% | 23.25% | 20.13% | 20.43% | |
| Lockheed Martin Corp. | 23.33% | 20.72% | 24.95% | 18.89% | 16.51% | |
| RTX Corp. | 20.17% | 22.52% | 36.10% | 18.64% | — | |
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 × 964 ÷ 4,818 = 20.00%
4 Click competitor name to see calculations.
The financial data reveals distinct trends in cash operating taxes, net operating profit before taxes (NOPBT), and the effective cash tax rate (CTR) over the five-year period from 2020 to 2024.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT demonstrates a consistent upward trend, increasing from $2,038 million in 2020 to $4,818 million in 2024. This represents more than a doubling in the operating profit before taxes over the five years, with notable increments especially between 2022 to 2023 and 2023 to 2024. The data indicates strengthened operational profitability year over year.
- Cash Operating Taxes
- Cash operating taxes also show a general increasing pattern, rising from $497 million in 2020 to $964 million in 2024. Although there is some fluctuation — notably a decline from $819 million in 2021 to $614 million in 2022 before climbing again — the overall trend is upward, consistent with the growth seen in NOPBT.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate presents a variable trend over the period. Starting at 24.39% in 2020, it increased slightly to 26.02% in 2021, then dropped significantly to 19.89% in 2022. Following this, it remained relatively stable around the 20% mark for 2023 and 2024. This decline in CTR after 2021 suggests improved tax efficiency or changes in tax planning strategies, even as profits continued to rise.
In summary, the data reflects growing profitability accompanied by generally increasing cash tax payments, while the effective tax rate has declined and stabilized at a lower level after 2021. This combination suggests effective management of tax obligations amid expanding operational earnings.