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)
Humana Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,726) | 3,053) | 3,172) | 3,874) | 3,029) | |
| Invested capital2 | 30,225) | 29,089) | 30,647) | 21,850) | 18,877) | |
| Performance Ratio | ||||||
| ROIC3 | 9.02% | 10.50% | 10.35% | 17.73% | 16.04% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Abbott Laboratories | 8.87% | 10.96% | 11.30% | — | — | |
| Elevance Health Inc. | 9.21% | 10.24% | 11.26% | — | — | |
| Intuitive Surgical Inc. | 22.30% | 22.01% | 37.63% | — | — | |
| Medtronic PLC | 5.89% | 7.02% | 5.59% | — | — | |
| UnitedHealth Group Inc. | 14.59% | 13.68% | 13.51% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,726 ÷ 30,225 = 9.02%
4 Click competitor name to see calculations.
An analysis of the return on invested capital from 2019 to 2023 reveals a significant contraction in capital efficiency. After reaching a peak in 2020, the return on invested capital entered a downward trajectory, driven by a simultaneous decrease in operating profitability and a substantial expansion of the invested capital base.
- Net Operating Profit After Taxes (NOPAT)
- Operating profitability experienced a peak in 2020 at US$ 3,874 million, followed by a consistent year-over-year decline through 2023. By the end of 2023, NOPAT reached US$ 2,726 million, marking a decrease of approximately 29.6% from the 2020 high and falling below 2019 levels.
- Invested Capital
- The capital base expanded significantly over the period, most notably between 2020 and 2021, when invested capital rose from US$ 21,850 million to US$ 30,647 million. Following this surge, the capital base remained elevated, ending 2023 at US$ 30,225 million, which represents a 60% increase compared to the 2019 position.
- Return on Invested Capital (ROIC)
- The ROIC peaked at 17.73% in 2020 before experiencing a sharp contraction to 10.35% in 2021. This decline was the result of a dual impact: decreasing NOPAT and a rapidly increasing denominator of invested capital. The downward trend persisted into 2023, with the ratio falling to 9.02%, signaling a diminishing ability to generate operating returns relative to the capital deployed.
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Decomposition of ROIC
Humana Inc., decomposition of ROIC
Based on: 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), 10-K (reporting date: 2019-12-31).
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 peak of 17.73% in 2020 before entering a general downward trajectory, ending at 9.02% by December 31, 2023. This contraction in returns is primarily attributed to a persistent compression in operating margins and an increasing effective cash tax burden, which neutralized the recovery in capital turnover.
- Operating Profit Margin (OPM)
- A consistent decline in profitability is observed following 2020. The operating profit margin decreased from a high of 6.64% in 2020 to 3.64% in 2023. This steady erosion suggests that rising operating expenses or diminishing pricing power have significantly hindered the ability to convert revenue into operating profit, acting as the primary driver for the lower ROIC.
- Turnover of Capital (TO)
- Capital efficiency demonstrated volatility but ultimately recovered. After a significant dip to 2.70 in 2021, the turnover ratio increased to 3.48 by 2023, returning to levels seen in 2020. This indicates that the decline in total returns was not caused by a failure in asset utilization or revenue generation relative to invested capital, but rather by the profitability of those operations.
- Effective Cash Tax Rate (CTR)
- The after-tax component of the ROIC decomposition reveals a downward trend in the "1 minus effective cash tax rate" metric, falling from 85.38% in 2021 to 71.09% in 2023. This trend indicates a rising effective cash tax rate over the last three years, which has further eroded the net returns available to the company.
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Operating Profit Margin (OPM)
Humana Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,726) | 3,053) | 3,172) | 3,874) | 3,029) | |
| Add: Cash operating taxes2 | 1,108) | 950) | 543) | 1,175) | 656) | |
| Net operating profit before taxes (NOPBT) | 3,834) | 4,003) | 3,715) | 5,049) | 3,684) | |
| External revenues | 105,305) | 92,488) | 82,877) | 76,001) | 64,387) | |
| Add: Increase (decrease) in unearned revenues | (20) | 32) | (64) | 71) | (36) | |
| Adjusted external revenues | 105,285) | 92,520) | 82,813) | 76,072) | 64,351) | |
| Profitability Ratio | ||||||
| OPM3 | 3.64% | 4.33% | 4.49% | 6.64% | 5.73% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Abbott Laboratories | 16.84% | 20.24% | 20.37% | — | — | |
| Elevance Health Inc. | 5.32% | 5.64% | 6.58% | — | — | |
| Intuitive Surgical Inc. | 28.14% | 26.19% | 33.56% | — | — | |
| Medtronic PLC | 19.63% | 19.15% | 16.48% | — | — | |
| UnitedHealth Group Inc. | 9.14% | 9.13% | 8.33% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Adjusted external revenues
= 100 × 3,834 ÷ 105,285 = 3.64%
4 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a significant divergence between revenue expansion and operating profitability. While top-line growth has been consistent and aggressive, the ability to convert these revenues into operating profit has diminished over the latter half of the period.
- Revenue Growth Trends
- Adjusted external revenues exhibited a continuous upward trajectory, increasing from 64,351 million US dollars in 2019 to 105,285 million US dollars in 2023. This represents a substantial expansion in the scale of operations over the five-year window.
- Net Operating Profit Before Taxes (NOPBT) Volatility
- Despite the steady increase in revenues, NOPBT did not follow a linear growth path. Profitability peaked in 2020 at 5,049 million US dollars before experiencing a correction in 2021. Although a slight recovery occurred in 2022, the figure declined again to 3,834 million US dollars by the end of 2023, ending the period only marginally higher than the 2019 level of 3,684 million US dollars.
- Operating Profit Margin (OPM) Compression
- The operating profit margin reached a peak of 6.64% in 2020 but has since entered a persistent downward trend. The margin declined to 4.49% in 2021, 4.33% in 2022, and reached a period low of 3.64% in 2023. This consistent compression indicates that operating expenses have grown at a faster rate than adjusted external revenues, leading to reduced operational efficiency.
In summary, the period is defined by a scaling of operations that has not translated into proportional profit growth. The steady decline in the operating profit margin since 2020 suggests a narrowing of the spread between revenue generation and the costs associated with delivering those services.
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Turnover of Capital (TO)
Humana Inc., TO calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| External revenues | 105,305) | 92,488) | 82,877) | 76,001) | 64,387) | |
| Add: Increase (decrease) in unearned revenues | (20) | 32) | (64) | 71) | (36) | |
| Adjusted external revenues | 105,285) | 92,520) | 82,813) | 76,072) | 64,351) | |
| Invested capital1 | 30,225) | 29,089) | 30,647) | 21,850) | 18,877) | |
| Efficiency Ratio | ||||||
| TO2 | 3.48 | 3.18 | 2.70 | 3.48 | 3.41 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Abbott Laboratories | 0.67 | 0.71 | 0.69 | — | — | |
| Elevance Health Inc. | 2.44 | 2.33 | 2.14 | — | — | |
| Intuitive Surgical Inc. | 1.00 | 1.16 | 1.27 | — | — | |
| Medtronic PLC | 0.44 | 0.46 | 0.42 | — | — | |
| UnitedHealth Group Inc. | 2.01 | 1.95 | 2.04 | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 Invested capital. See details »
2 2023 Calculation
TO = Adjusted external revenues ÷ Invested capital
= 105,285 ÷ 30,225 = 3.48
3 Click competitor name to see calculations.
Between 2019 and 2023, a sustained expansion in revenue was accompanied by fluctuations in invested capital, resulting in a period of volatility in capital turnover efficiency that ultimately returned to previous peak levels.
- Adjusted External Revenue Trends
- A consistent upward trajectory in adjusted external revenues is observed, increasing from 64,351 million US dollars in 2019 to 105,285 million US dollars by the end of 2023. This steady growth indicates a continuous expansion of the operational scale over the five-year period.
- Invested Capital Deployment
- Invested capital exhibited an overall increase, rising from 18,877 million US dollars in 2019 to 30,225 million US dollars in 2023. A significant spike is noted in 2021, where invested capital reached 30,647 million US dollars, representing a sharp increase from the previous year. This was followed by a period of relative stabilization, with values remaining near 30,000 million US dollars through 2023.
- Turnover of Capital (TO) Efficiency
- The turnover of capital ratio demonstrates a V-shaped recovery pattern. After maintaining a level of 3.48 in 2020, the ratio declined to 2.70 in 2021, a downturn that correlates with the rapid increase in invested capital outstripping revenue growth. Following this dip, a recovery phase is observed, with the ratio improving to 3.18 in 2022 and returning to 3.48 by 2023. This return to the 2020 level suggests that the company has successfully optimized its expanded capital base to drive higher revenue productivity.
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Effective Cash Tax Rate (CTR)
Humana Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,726) | 3,053) | 3,172) | 3,874) | 3,029) | |
| Add: Cash operating taxes2 | 1,108) | 950) | 543) | 1,175) | 656) | |
| Net operating profit before taxes (NOPBT) | 3,834) | 4,003) | 3,715) | 5,049) | 3,684) | |
| Tax Rate | ||||||
| CTR3 | 28.91% | 23.74% | 14.62% | 23.28% | 17.80% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Abbott Laboratories | 21.67% | 23.97% | 20.05% | — | — | |
| Elevance Health Inc. | 29.13% | 22.01% | 20.22% | — | — | |
| Intuitive Surgical Inc. | 20.94% | 27.40% | 11.76% | — | — | |
| Medtronic PLC | 32.28% | 19.53% | 18.59% | — | — | |
| UnitedHealth Group Inc. | 20.64% | 23.25% | 20.32% | — | — | |
Based on: 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), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 1,108 ÷ 3,834 = 28.91%
4 Click competitor name to see calculations.
The analysis of the effective cash tax rate reveals a period of volatility characterized by a significant trough in 2021 followed by a consistent and sharp upward trajectory. While net operating profit before taxes fluctuated over the five-year period, the actual cash tax burden relative to those profits has intensified significantly by the end of the period.
- Effective Cash Tax Rate (CTR) Trends
- The CTR exhibited substantial variance, starting at 17.80% in 2019 and rising to 23.28% in 2020. A notable decline occurred in 2021, where the rate dropped to a period low of 14.62%. Subsequently, the rate climbed aggressively, reaching 23.74% in 2022 and peaking at 28.91% in 2023, marking a nearly twofold increase from the 2021 low.
- Relationship Between NOPBT and Cash Operating Taxes
- A divergence is observed between operating profitability and tax outflows. In 2020, the highest net operating profit before taxes (NOPBT) of US$ 5,049 million corresponded with a cash tax payment of US$ 1,175 million. By 2023, cash operating taxes reached a similar level of US$ 1,108 million, yet this occurred against a significantly lower NOPBT of US$ 3,834 million. This disparity underscores the increase in the effective cash tax rate.
- Operational Tax Efficiency
- The data indicates a decline in cash tax efficiency over the most recent three-year window. The transition from a 14.62% CTR in 2021 to 28.91% in 2023 suggests that a larger portion of operating profit is being utilized to settle tax obligations. This trend indicates that the company's ability to minimize cash tax outflows relative to its operating profit has diminished, potentially impacting overall return on capital.
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