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)
Generac Holdings Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 641,346) | 422,020) | 326,014) | 316,757) | 230,606) | |
| Invested capital2 | 3,771,373) | 2,684,660) | 2,246,986) | 1,970,846) | 1,710,524) | |
| Performance Ratio | ||||||
| ROIC3 | 17.01% | 15.72% | 14.51% | 16.07% | 13.48% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | -5.35% | — | — | — | — | |
| Caterpillar Inc. | 12.58% | — | — | — | — | |
| Eaton Corp. plc | 7.84% | — | — | — | — | |
| GE Aerospace | -2.53% | — | — | — | — | |
| Honeywell International Inc. | 12.33% | — | — | — | — | |
| Lockheed Martin Corp. | 22.51% | — | — | — | — | |
| RTX Corp. | 4.52% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2021 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 641,346 ÷ 3,771,373 = 17.01%
4 Click competitor name to see calculations.
An analysis of the return on invested capital (ROIC) from 2017 to 2021 reveals a positive trajectory in capital efficiency and operational profitability. Throughout the period, there is a concurrent expansion in both the scale of invested capital and the resulting net operating profit after taxes (NOPAT), indicating a period of significant growth.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trend is observed in NOPAT, which increased from $230.6 million in 2017 to $641.3 million in 2021. The most substantial growth occurred between 2020 and 2021, where profits grew by approximately 51.9%, signaling a sharp acceleration in operational earning power toward the end of the period.
- Invested Capital
- Invested capital grew steadily from $1.71 billion in 2017 to $3.77 billion in 2021. The capital base expanded by approximately 120% over the five-year span. The most significant increase in capital deployment occurred in 2021, coinciding with the peak in NOPAT.
- Return on Invested Capital (ROIC)
- ROIC exhibited overall growth, rising from 13.48% in 2017 to 17.01% in 2021. A brief contraction was noted in 2019, when the ratio declined to 14.51%, suggesting that capital expansion temporarily outpaced profit growth. However, the subsequent recovery and peak in 2021 indicate that the company successfully improved its ability to generate returns from its increasing capital base.
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Decomposition of ROIC
Generac Holdings Inc., decomposition of ROIC
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
Return on invested capital (ROIC) exhibited a general upward trajectory between 2017 and 2021, rising from 13.48% to 17.01%. Although a temporary contraction occurred in 2019, the overall trend indicates a strengthening of capital efficiency over the five-year period.
- Operating Profit Margin (OPM)
- A consistent expansion in profitability is observed, with the margin increasing from 15.96% in 2017 to 20.89% by 2021. This growth represents the primary driver of the overall increase in ROIC, suggesting improved operational efficiency and enhanced profitability per unit of revenue.
- Turnover of Capital (TO)
- Capital turnover remained relatively stable throughout the analyzed period, fluctuating within a narrow range between a low of 0.93 in 2020 and a high of 1.03 in 2018. The lack of significant variance indicates that the improvement in returns was not derived from increased asset utilization or higher revenue generation relative to the invested capital base.
- After-Tax Retention (1 – Effective Cash Tax Rate)
- A gradual decline is noted in the after-tax retention rate, which decreased from 85.38% in 2017 to 81.69% in 2021. This downward trend indicates an increase in the effective cash tax rate, which acted as a marginal drag on the net return to invested capital.
- ROIC Decomposition Synthesis
- The decomposition reveals that the growth in ROIC was predominantly fueled by the expansion of the operating profit margin. These operational gains were sufficient to more than offset the negative impact of a rising effective tax rate, while capital turnover remained a neutral component in the return equation.
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Operating Profit Margin (OPM)
Generac Holdings Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 641,346) | 422,020) | 326,014) | 316,757) | 230,606) | |
| Add: Cash operating taxes2 | 143,731) | 86,003) | 56,860) | 54,282) | 39,500) | |
| Net operating profit before taxes (NOPBT) | 785,077) | 508,023) | 382,874) | 371,039) | 270,106) | |
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Add: Increase (decrease) in deferred revenue related to extended warranties | 21,859) | 11,050) | 10,398) | 10,486) | 19,861) | |
| Adjusted net sales | 3,759,043) | 2,496,250) | 2,214,734) | 2,033,950) | 1,692,306) | |
| Profitability Ratio | ||||||
| OPM3 | 20.89% | 20.35% | 17.29% | 18.24% | 15.96% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | -3.17% | — | — | — | — | |
| Caterpillar Inc. | 19.09% | — | — | — | — | |
| Eaton Corp. plc | 15.90% | — | — | — | — | |
| GE Aerospace | -2.35% | — | — | — | — | |
| Honeywell International Inc. | 21.58% | — | — | — | — | |
| Lockheed Martin Corp. | 11.85% | — | — | — | — | |
| RTX Corp. | 9.65% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2021 Calculation
OPM = 100 × NOPBT ÷ Adjusted net sales
= 100 × 785,077 ÷ 3,759,043 = 20.89%
4 Click competitor name to see calculations.
An analysis of the five-year period from 2017 to 2021 reveals a consistent upward trajectory in both operating profitability and revenue generation, characterized by significant acceleration in the final two years.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT demonstrated steady growth over the analyzed period, increasing from US$ 270.1 million in 2017 to US$ 785.1 million in 2021. A notable surge is observed between 2020 and 2021, where profit grew by approximately 54.5%, indicating a substantial increase in the company's ability to generate operating income.
- Adjusted Net Sales
- Adjusted net sales followed a strong growth pattern, rising from US$ 1.69 billion in 2017 to US$ 3.76 billion in 2021. The growth was relatively stable between 2017 and 2020, followed by a sharp increase in 2021, suggesting a significant expansion in market reach or product demand.
- Operating Profit Margin (OPM)
- The operating profit margin generally expanded from 15.96% in 2017 to 20.89% in 2021. Although a marginal contraction occurred in 2019, where the margin dipped to 17.29%, the subsequent recovery and expansion beyond the 20% threshold in 2020 and 2021 indicate enhanced operational efficiency and improved cost control relative to the growth in sales.
The correlation between the rising net sales and the expanding operating profit margin suggests that the company benefited from positive operating leverage, where the growth in revenue outpaced the growth in operating expenses.
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Turnover of Capital (TO)
Generac Holdings Inc., TO calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 3,737,184) | 2,485,200) | 2,204,336) | 2,023,464) | 1,672,445) | |
| Add: Increase (decrease) in deferred revenue related to extended warranties | 21,859) | 11,050) | 10,398) | 10,486) | 19,861) | |
| Adjusted net sales | 3,759,043) | 2,496,250) | 2,214,734) | 2,033,950) | 1,692,306) | |
| Invested capital1 | 3,771,373) | 2,684,660) | 2,246,986) | 1,970,846) | 1,710,524) | |
| Efficiency Ratio | ||||||
| TO2 | 1.00 | 0.93 | 0.99 | 1.03 | 0.99 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | 1.26 | — | — | — | — | |
| Caterpillar Inc. | 0.87 | — | — | — | — | |
| Eaton Corp. plc | 0.67 | — | — | — | — | |
| GE Aerospace | 0.99 | — | — | — | — | |
| Honeywell International Inc. | 0.72 | — | — | — | — | |
| Lockheed Martin Corp. | 2.34 | — | — | — | — | |
| RTX Corp. | 0.58 | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Invested capital. See details »
2 2021 Calculation
TO = Adjusted net sales ÷ Invested capital
= 3,759,043 ÷ 3,771,373 = 1.00
3 Click competitor name to see calculations.
The financial trajectory from 2017 to 2021 is characterized by a sustained expansion in both revenue and the capital base, while capital efficiency remained largely constant.
- Revenue Growth Trends
- Adjusted net sales exhibited a consistent upward trajectory, increasing from 1,692,306 thousand US$ in 2017 to 3,759,043 thousand US$ in 2021. A notable acceleration in growth occurred between 2020 and 2021, during which sales increased by approximately 50%.
- Invested Capital Expansion
- Invested capital tracked closely with revenue growth, rising from 1,710,524 thousand US$ in 2017 to 3,771,373 thousand US$ in 2021. This indicates a proportional increase in the resource base required to support the expanding scale of operations.
- Capital Turnover Analysis
- The turnover of capital ratio remained stable throughout the five-year period, fluctuating narrowly between a low of 0.93 in 2020 and a peak of 1.03 in 2018. The ratio concluded the period at 1.00 in 2021, suggesting that the significant surge in sales was matched by an equivalent increase in invested capital, thereby maintaining a consistent level of operational efficiency despite the rapid increase in organizational scale.
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Effective Cash Tax Rate (CTR)
Generac Holdings Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 641,346) | 422,020) | 326,014) | 316,757) | 230,606) | |
| Add: Cash operating taxes2 | 143,731) | 86,003) | 56,860) | 54,282) | 39,500) | |
| Net operating profit before taxes (NOPBT) | 785,077) | 508,023) | 382,874) | 371,039) | 270,106) | |
| Tax Rate | ||||||
| CTR3 | 18.31% | 16.93% | 14.85% | 14.63% | 14.62% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 24.06% | — | — | — | — | |
| Eaton Corp. plc | 26.02% | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | 20.13% | — | — | — | — | |
| Lockheed Martin Corp. | 18.89% | — | — | — | — | |
| RTX Corp. | 18.64% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2021 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 143,731 ÷ 785,077 = 18.31%
4 Click competitor name to see calculations.
An analysis of the fiscal period from 2017 to 2021 reveals a consistent upward trajectory in both operational profitability and associated cash tax obligations. The growth in cash operating taxes has mirrored the expansion of net operating profit before taxes, although the proportional relationship shifted toward a higher tax burden in the later years of the period.
- Net Operating Profit Before Taxes (NOPBT)
- A sustained increase in NOPBT is observed, rising from US$ 270.1 million in 2017 to US$ 785.1 million by 2021. This growth demonstrates a significant expansion in operational earnings, with the most substantial absolute increase occurring between 2020 and 2021.
- Cash Operating Taxes
- Cash operating taxes followed a similar growth pattern, increasing from US$ 39.5 million in 2017 to US$ 143.7 million in 2021. The acceleration of these payments became particularly evident in 2021, where tax outflows increased by approximately 66.6% compared to the previous year.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate exhibited a steady upward trend. Between 2017 and 2019, the CTR remained relatively stable, ranging from 14.62% to 14.85%. However, a more pronounced increase occurred in 2020 and 2021, with the rate climbing to 16.93% and 18.31%, respectively. This shift indicates that the cash tax burden grew at a faster rate than the net operating profit during the final two years of the analysis.
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