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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Eaton Corp. plc pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
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Return on Invested Capital (ROIC)
Eaton Corp. plc, ROIC calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period demonstrates a consistent upward trend in Return on Invested Capital (ROIC). This improvement is supported by increases in both Net Operating Profit After Taxes (NOPAT) and Invested Capital, though the growth in NOPAT appears to be the primary driver of the ROIC improvement.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased steadily throughout the period, moving from US$2,328 million in 2021 to US$4,690 million in 2025. The rate of increase accelerated from 2022 to 2023, and continued at a strong pace through 2025. This suggests improving operational efficiency or increased demand for the company’s products and services.
- Invested Capital
- Invested Capital also increased over the period, rising from US$29,709 million in 2021 to US$34,920 million in 2025. However, the growth in Invested Capital was more moderate than the growth in NOPAT, indicating that the company is becoming more efficient at generating profit from its capital base.
- Return on Invested Capital (ROIC)
- ROIC exhibited a clear upward trajectory, beginning at 7.84% in 2021 and reaching 13.43% in 2025. The increase was gradual initially, moving to 8.00% in 2022, before accelerating significantly in 2023 (10.48%) and continuing through 2024 (12.07%) and 2025. This indicates a strengthening ability to generate returns from capital employed.
The consistent growth in ROIC, coupled with the accelerating NOPAT growth, suggests positive developments in the company’s profitability and capital allocation strategies. The relatively stable growth in invested capital, compared to the more rapid growth in NOPAT, further reinforces the conclusion that the company is improving its efficiency in utilizing its capital base.
Decomposition of ROIC
Eaton Corp. plc, decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2025 | = | × | × | ||||
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × |
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The period demonstrates a consistent improvement in Return on Invested Capital (ROIC), driven by positive movements in its key components. Operating Profit Margin, Turnover of Capital, and the impact of the Effective Cash Tax Rate all contribute to this trend.
- Operating Profit Margin (OPM)
- The Operating Profit Margin exhibits a clear upward trajectory, increasing from 15.90% in 2021 to 20.02% in 2025. This represents a substantial improvement in profitability from operations over the five-year period. The increase suggests enhanced cost management, pricing power, or a shift towards higher-margin products and services.
- Turnover of Capital (TO)
- Turnover of Capital shows a moderate, but consistent, increase from 0.67 in both 2021 and 2022 to 0.79 in 2025. This indicates increasing efficiency in utilizing capital to generate revenue. While the gains are not as dramatic as those seen in the Operating Profit Margin, the steady improvement is a positive sign.
- Effective Cash Tax Rate Adjustment (1 – CTR)
- The factor representing one minus the Effective Cash Tax Rate generally increased over the period, moving from 73.98% in 2021 to 84.42% in 2025. This suggests a decreasing effective tax rate, which positively impacts after-tax profitability and, consequently, ROIC. The increase is most pronounced between 2021 and 2022, and then stabilizes before a more significant rise in 2025.
- Return on Invested Capital (ROIC)
- ROIC demonstrates a consistent upward trend, rising from 7.84% in 2021 to 13.43% in 2025. This improvement is directly attributable to the combined positive effects of the increasing Operating Profit Margin, Turnover of Capital, and the favorable shift in the Effective Cash Tax Rate adjustment. The rate of ROIC increase accelerates in the later years of the period.
In summary, the observed trends indicate improving financial performance and efficient capital allocation. The consistent growth in ROIC, driven by improvements in profitability, asset utilization, and tax efficiency, suggests a strengthening financial position.
Operating Profit Margin (OPM)
Eaton Corp. plc, OPM calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue liabilities | ||||||
| Adjusted net sales | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted net sales
= 100 × ÷ =
4 Click competitor name to see calculations.
The operating profit margin (OPM) exhibits a clear upward trend over the five-year period. Simultaneously, net operating profit before taxes (NOPBT) and adjusted net sales demonstrate consistent growth. A detailed examination of these trends is presented below.
- Operating Profit Margin (OPM)
- The OPM began at 15.90% in 2021. A slight decrease was observed in 2022, with the OPM falling to 14.81%. However, from 2022 onwards, the OPM consistently increased. It rose to 17.76% in 2023, then to 19.37% in 2024, and culminated at 20.02% in 2025. This indicates improving profitability relative to sales.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT experienced a minor decline from US$3,147 million in 2021 to US$3,086 million in 2022. Subsequent years show substantial growth, reaching US$4,141 million in 2023, US$4,818 million in 2024, and US$5,555 million in 2025. This growth in absolute profit contributes to the increasing OPM.
- Adjusted Net Sales
- Adjusted net sales demonstrate a consistent upward trajectory throughout the period. Sales increased from US$19,793 million in 2021 to US$20,838 million in 2022, US$23,314 million in 2023, US$24,870 million in 2024, and ultimately reached US$27,753 million in 2025. The growth in sales, coupled with the increasing OPM, suggests strong operational performance.
The combined trends suggest that the entity is becoming more efficient in converting sales into operating profit. The increase in OPM, alongside growing sales and NOPBT, points to improved cost management and/or pricing strategies. The dip in OPM in 2022, while minor, warrants further investigation to understand the underlying factors contributing to the temporary decrease.
Turnover of Capital (TO)
Eaton Corp. plc, TO calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue liabilities | ||||||
| Adjusted net sales | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Invested capital. See details »
2 2025 Calculation
TO = Adjusted net sales ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The analysis reveals a consistent upward trend in the Turnover of Capital (TO) ratio over the five-year period. This indicates increasing efficiency in generating sales from the company’s invested capital.
- Adjusted Net Sales
- Adjusted net sales demonstrate a steady increase throughout the period, moving from 19,793 US$ millions in 2021 to 27,753 US$ millions in 2025. The growth is not linear, with a more substantial increase observed between 2022 and 2023, and continuing at a similar pace through 2025.
- Invested Capital
- Invested capital exhibits a more moderate growth pattern. While increasing from 29,709 US$ millions in 2021 to 34,920 US$ millions in 2025, the rate of increase is slower than that of adjusted net sales. The smallest incremental change occurs between 2023 and 2024.
- Turnover of Capital (TO)
- The Turnover of Capital ratio begins at 0.67 in 2021 and 2022, remaining constant during those years. A noticeable increase is then observed, reaching 0.74 in 2023, and continuing to rise to 0.78 in 2024 and 0.79 in 2025. This progression suggests the company is becoming increasingly effective at utilizing its invested capital to generate revenue. The consistent rise, coupled with the faster growth in sales relative to invested capital, points to improved operational efficiency and capital allocation.
In summary, the observed trends suggest a positive development in the company’s ability to generate sales from its invested capital base. The increasing TO ratio, driven by stronger sales growth and relatively stable invested capital, indicates improved capital utilization efficiency.
Effective Cash Tax Rate (CTR)
Eaton Corp. plc, CTR calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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. | ||||||
| Caterpillar Inc. | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The effective cash tax rate exhibited fluctuations over the five-year period. Cash operating taxes and net operating profit before taxes both demonstrated increases overall, though not consistently year-over-year. A detailed examination of the effective cash tax rate reveals notable shifts in the company’s tax burden.
- Effective Cash Tax Rate (CTR) - Trend Analysis
- The effective cash tax rate began at 26.02% in 2021. A significant decrease was observed in 2022, falling to 19.89%. This downward trend continued modestly into 2023, reaching 20.06%, and remained stable at 20.00% in 2024. However, 2025 saw a further, more substantial decline to 15.58%. This suggests a decreasing proportion of pre-tax profits are being paid as cash taxes.
- Relationship between NOPBT and Cash Operating Taxes
- Net operating profit before taxes increased from US$3,147 million in 2021 to US$5,555 million in 2025. Cash operating taxes also increased overall, moving from US$819 million in 2021 to US$866 million in 2025. However, the increase in cash taxes did not keep pace with the increase in NOPBT, contributing to the observed decline in the effective cash tax rate. A dip in cash taxes was seen in 2022, coinciding with the largest single-year drop in the CTR.
The consistency of the CTR between 2023 and 2024, followed by the notable decrease in 2025, warrants further investigation. Potential factors contributing to these changes could include shifts in the geographic distribution of profits, changes in tax legislation, or the utilization of tax credits and deductions. The decreasing CTR in the most recent year suggests improved tax efficiency or a change in the company’s operational structure impacting its tax liabilities.