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)
Hubbell Inc., 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 thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 597,801) | 458,435) | 403,273) | 472,549) | 591,651) | |
| Invested capital2 | 4,504,100) | 4,298,100) | 4,325,800) | 4,209,500) | 4,206,535) | |
| Performance Ratio | ||||||
| ROIC3 | 13.27% | 10.67% | 9.32% | 11.23% | 14.07% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | -5.72% | -5.35% | — | — | — | |
| Caterpillar Inc. | 13.41% | 12.58% | — | — | — | |
| Eaton Corp. plc | 8.00% | 7.84% | — | — | — | |
| GE Aerospace | 2.73% | -2.53% | — | — | — | |
| Honeywell International Inc. | 11.54% | 12.33% | — | — | — | |
| Lockheed Martin Corp. | 21.60% | 22.51% | — | — | — | |
| RTX Corp. | 4.24% | 4.52% | — | — | — | |
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 × 597,801 ÷ 4,504,100 = 13.27%
4 Click competitor name to see calculations.
The analysis of the return on invested capital (ROIC) from 2018 to 2022 reveals a cyclical performance trend characterized by an initial contraction in profitability followed by a robust recovery.
- Net Operating Profit After Taxes (NOPAT)
- A significant downward trend is observed between 2018 and 2020, with NOPAT declining from US$ 591.65 million to a period low of US$ 403.27 million. This decline was reversed in the subsequent two years, with figures rising to US$ 458.44 million in 2021 and reaching US$ 597.80 million by 2022, effectively returning to 2018 profitability levels.
- Invested Capital
- The invested capital base remained relatively stable from 2018 through 2021, fluctuating narrowly between US$ 4.21 billion and US$ 4.33 billion. A more notable increase occurred in 2022, where invested capital rose to US$ 4.50 billion, representing the highest capital deployment within the analyzed timeframe.
- Return on Invested Capital (ROIC)
- ROIC mirrored the trajectory of NOPAT, decreasing from 14.07% in 2018 to a trough of 9.32% in 2020. The subsequent recovery in operating profits drove the ROIC upward to 10.67% in 2021 and 13.27% in 2022. Because the capital base remained comparatively stable during the period of decline, the contraction in ROIC is primarily attributable to the reduction in net operating profit rather than an over-expansion of the capital base.
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Decomposition of ROIC
Hubbell Inc., 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 a U-shaped trajectory over the five-year period, declining from 14.07% in 2018 to a trough of 9.32% in 2020, before recovering to 13.27% by the end of 2022. This fluctuation is the result of interacting shifts in operational profitability, asset efficiency, and tax impacts.
- Operating Profit Margin (OPM)
- Operational profitability followed a pattern similar to the overall ROIC. Margins contracted from 14.66% in 2018 to a period low of 12.20% in 2020. A subsequent recovery saw margins expand to 15.61% in 2022, representing the highest margin in the analyzed period and serving as a primary catalyst for the increase in ROIC.
- Turnover of Capital (TO)
- Capital turnover remained relatively stable but experienced a notable dip during the mid-period, falling from 1.09 in 2019 to 0.97 in both 2020 and 2021. The return to a ratio of 1.10 in 2022 indicates a restoration of asset utilization efficiency, contributing to the overall improvement in capital returns.
- Effective Cash Tax Rate (1 – CTR)
- The after-tax retention factor demonstrated a general downward trend with some volatility, starting at 89.72% in 2018 and ending at 76.94% in 2022. This decrease indicates that cash taxes consumed a larger portion of operating profits over time, creating a persistent headwind that partially offset the gains achieved through improved operating margins and capital turnover.
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Operating Profit Margin (OPM)
Hubbell Inc., 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 thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 597,801) | 458,435) | 403,273) | 472,549) | 591,651) | |
| Add: Cash operating taxes2 | 179,191) | 90,971) | 107,537) | 122,697) | 67,810) | |
| Net operating profit before taxes (NOPBT) | 776,993) | 549,406) | 510,810) | 595,246) | 659,460) | |
| Net sales | 4,947,900) | 4,194,100) | 4,186,000) | 4,591,000) | 4,481,700) | |
| Add: Increase (decrease) in contract liabilities, deferred revenue | 29,100) | (13,100) | (100) | 3,300) | 17,500) | |
| Adjusted net sales | 4,977,000) | 4,181,000) | 4,185,900) | 4,594,300) | 4,499,200) | |
| Profitability Ratio | ||||||
| OPM3 | 15.61% | 13.14% | 12.20% | 12.96% | 14.66% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | -3.49% | -3.17% | — | — | — | |
| Caterpillar Inc. | 17.42% | 19.09% | — | — | — | |
| Eaton Corp. plc | 14.81% | 15.90% | — | — | — | |
| GE Aerospace | 4.46% | -2.35% | — | — | — | |
| Honeywell International Inc. | 19.83% | 21.58% | — | — | — | |
| Lockheed Martin Corp. | 11.60% | 11.85% | — | — | — | |
| RTX Corp. | 10.88% | 9.65% | — | — | — | |
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 ÷ Adjusted net sales
= 100 × 776,993 ÷ 4,977,000 = 15.61%
4 Click competitor name to see calculations.
Hubbell Inc. exhibited a fluctuating trend in its operating profitability between 2018 and 2022, characterized by an initial period of contraction followed by a strong recovery and expansion.
- Operating Profit Margin Trajectory
- The operating profit margin experienced a steady decline from 14.66% in 2018 to a five-year low of 12.20% in 2020. This contraction reflects a period where net operating profit before taxes (NOPBT) decreased from 659,460 thousand US dollars to 510,810 thousand US dollars.
- Profitability Recovery and Expansion
- A positive reversal in profitability began in 2021, with the margin rising to 13.14%. This upward momentum accelerated significantly in 2022, reaching a peak of 15.61%. This expansion was supported by a substantial increase in NOPBT, which rose to 776,993 thousand US dollars, the highest value in the analyzed period.
- Revenue and Margin Correlation
- The relationship between adjusted net sales and operating margins indicates varying levels of operational efficiency. In 2019, a slight increase in sales to 4,594,300 thousand US dollars was accompanied by a decrease in margin to 12.96%, suggesting an increase in operating expenses. Conversely, the 2022 results show a strong correlation between growth and efficiency, as adjusted net sales reached a peak of 4,977,000 thousand US dollars alongside the highest recorded operating profit margin.
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Turnover of Capital (TO)
Hubbell Inc., 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 thousands) | ||||||
| Net sales | 4,947,900) | 4,194,100) | 4,186,000) | 4,591,000) | 4,481,700) | |
| Add: Increase (decrease) in contract liabilities, deferred revenue | 29,100) | (13,100) | (100) | 3,300) | 17,500) | |
| Adjusted net sales | 4,977,000) | 4,181,000) | 4,185,900) | 4,594,300) | 4,499,200) | |
| Invested capital1 | 4,504,100) | 4,298,100) | 4,325,800) | 4,209,500) | 4,206,535) | |
| Efficiency Ratio | ||||||
| TO2 | 1.10 | 0.97 | 0.97 | 1.09 | 1.07 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | 1.31 | 1.26 | — | — | — | |
| Caterpillar Inc. | 1.03 | 0.87 | — | — | — | |
| Eaton Corp. plc | 0.67 | 0.67 | — | — | — | |
| GE Aerospace | 1.10 | 0.99 | — | — | — | |
| Honeywell International Inc. | 0.76 | 0.72 | — | — | — | |
| Lockheed Martin Corp. | 2.48 | 2.34 | — | — | — | |
| RTX Corp. | 0.61 | 0.58 | — | — | — | |
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 = Adjusted net sales ÷ Invested capital
= 4,977,000 ÷ 4,504,100 = 1.10
3 Click competitor name to see calculations.
The analysis of capital turnover between 2018 and 2022 reveals a period of volatility followed by a significant recovery in asset productivity. The turnover of capital ratio, which measures the efficiency with which the company generates sales from its invested capital, experienced a decline in the middle of the period before reaching a five-year peak in 2022.
- Adjusted Net Sales Trends
- Sales exhibited a modest increase from 2018 to 2019, followed by a contraction in 2020 and relative stagnation in 2021. A substantial recovery occurred in 2022, with adjusted net sales rising to 4,977,000 thousand US$, the highest value recorded in the analyzed timeframe.
- Invested Capital Stability
- The invested capital base remained relatively stable over the five-year period, moving from 4,206,535 thousand US$ in 2018 to 4,504,100 thousand US$ in 2022. The lack of aggressive fluctuation in the capital base indicates that changes in the turnover ratio were primarily driven by fluctuations in sales volume rather than significant shifts in the investment structure.
- Turnover of Capital Dynamics
- The turnover ratio peaked at 1.09 in 2019 before dropping to 0.97 in 2020 and 2021, reflecting the decrease in sales efficiency during those years. By 2022, the ratio increased to 1.10, indicating that the company achieved its highest level of capital productivity during the period, effectively generating more revenue for every dollar of invested capital.
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Effective Cash Tax Rate (CTR)
Hubbell Inc., 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 thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 597,801) | 458,435) | 403,273) | 472,549) | 591,651) | |
| Add: Cash operating taxes2 | 179,191) | 90,971) | 107,537) | 122,697) | 67,810) | |
| Net operating profit before taxes (NOPBT) | 776,993) | 549,406) | 510,810) | 595,246) | 659,460) | |
| Tax Rate | ||||||
| CTR3 | 23.06% | 16.56% | 21.05% | 20.61% | 10.28% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 25.42% | 24.06% | — | — | — | |
| Eaton Corp. plc | 19.89% | 26.02% | — | — | — | |
| GE Aerospace | 44.47% | — | — | — | — | |
| Honeywell International Inc. | 23.25% | 20.13% | — | — | — | |
| Lockheed Martin Corp. | 24.95% | 18.89% | — | — | — | |
| RTX Corp. | 36.10% | 18.64% | — | — | — | |
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 × 179,191 ÷ 776,993 = 23.06%
4 Click competitor name to see calculations.
The effective cash tax rate (CTR) exhibited significant volatility between 2018 and 2022, moving from a low of 10.28% to a peak of 23.06%. This period was characterized by fluctuations in both the nominal cash tax payments and the underlying net operating profit before taxes (NOPBT).
- Net Operating Profit Before Taxes (NOPBT)
- A downward trend in NOPBT was observed from 2018 to 2020, with values declining from US$ 659.46 million to US$ 510.81 million. A reversal occurred in 2021, followed by a substantial increase in 2022, where NOPBT reached its highest point in the period at US$ 776.99 million.
- Cash Operating Taxes
- Cash tax payments showed sharp fluctuations. After an initial increase from US$ 67.81 million in 2018 to US$ 122.70 million in 2019, payments declined steadily through 2021 to US$ 90.97 million. In 2022, cash operating taxes spiked to US$ 179.19 million, representing a significant increase compared to the preceding year.
- Effective Cash Tax Rate (CTR) Trends
- The CTR experienced a sharp rise between 2018 and 2019, effectively doubling from 10.28% to 20.61%. The rate remained relatively stable in 2020 at 21.05% before contracting to 16.56% in 2021. The period concluded with a peak rate of 23.06% in 2022, coinciding with the highest recorded NOPBT and cash tax payments.
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