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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Return on Invested Capital (ROIC)
International Business Machines Corp., 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited variability over the five-year period. Starting at $4,477 million in 2020, there was a slight decline to $4,163 million in 2021. A significant downturn occurred in 2022, with NOPAT turning negative to -$710 million. This was followed by a strong recovery in 2023, reaching a peak of $8,615 million, before decreasing again to $4,895 million in 2024. Overall, the NOPAT trend reflects notable fluctuations, with a pronounced dip in 2022 and a subsequent rebound.
- Invested Capital
- Invested capital showed a general downward trend from 2020 through 2022, decreasing from $130,176 million to $104,131 million. In 2023, there was an increase to $112,927 million, with a slight decline to $111,965 million in 2024. The variation suggests some degree of capital reinvestment or restructuring, particularly noticeable after the 2022 low point.
- Return on Invested Capital (ROIC)
- ROIC followed a pattern consistent with changes in NOPAT and invested capital. It improved slightly from 3.44% in 2020 to 3.78% in 2021, then fell to a negative -0.68% in 2022, reflecting the loss in profitability during that year. A strong recovery occurred in 2023, with ROIC more than doubling to 7.63%, before it declined again to 4.37% in 2024. The movements in ROIC highlight periods of both underperformance and substantial improvement in capital efficiency and profitability.
Decomposition of ROIC
International Business Machines Corp., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
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 variability across the periods analyzed. Starting at 9.64% in 2020, it increased to 10.91% in 2021 before experiencing a sharp decline to 2.98% in 2022. A significant recovery occurred in 2023, with the margin reaching a peak of 17.57%, followed by a decrease to 11.46% in 2024. This pattern indicates fluctuating profitability at the operating level, with notable improvements in 2023 after a weak performance in 2022.
- Turnover of Capital (TO)
- The turnover of capital remained relatively stable throughout the observed periods. It started at 0.58 in 2020, dropped slightly to 0.52 in 2021, and then returned to around the initial level in the subsequent years (0.58 in 2022, 0.56 in 2023, and 0.57 in 2024). This consistency suggests stable efficiency in the use of capital to generate revenue over time.
- 1 – Effective Cash Tax Rate (CTR)
- The measure of 1 minus the effective cash tax rate exhibits significant fluctuations. It increased from 62.05% in 2020 to 66.15% in 2021, then dropped sharply to a negative value of -39.75% in 2022, indicating either tax credits or refunds exceeding the tax liability. The ratio rebounded to 77.44% in 2023 and decreased to 67.51% in 2024. These changes imply considerable variability in the company’s effective cash tax position, reflecting possible changes in tax strategy, credit utilization, or tax expense volatility.
- Return on Invested Capital (ROIC)
- Return on invested capital followed a varied trajectory. It began at 3.44% in 2020, improved modestly to 3.78% in 2021, then turned negative (-0.68%) in 2022, indicating a period of value destruction. The indicator improved significantly to 7.63% in 2023 before dropping to 4.37% in 2024. These swings highlight periods of fluctuating efficiency in generating returns from invested capital, with a marked recovery in 2023 after the downturn in 2022.
Operating Profit Margin (OPM)
International Business Machines Corp., 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 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred income | ||||||
| Adjusted revenue | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 revenue
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibits significant fluctuations over the analyzed period. It initially decreased from 7,215 million USD in 2020 to 6,293 million USD in 2021, followed by a sharp decline to 1,787 million USD in 2022. Subsequently, there was a strong recovery in 2023, with NOPBT rising to 11,124 million USD, before declining again to 7,251 million USD in 2024. This pattern suggests volatility in profitability, with a notable peak occurring in 2023.
- Adjusted Revenue
- The adjusted revenue shows a downward trend from 74,877 million USD in 2020 to 57,707 million USD in 2021. After this drop, revenue experienced moderate growth during 2022 and 2023, reaching 63,313 million USD and 63,298 million USD respectively. This indicates a period of contraction followed by stabilization in revenue levels, though the revenue in 2024 remains below the 2020 level.
- Operating Profit Margin (OPM)
- The operating profit margin fluctuates throughout the period. It increased from 9.64% in 2020 to 10.91% in 2021 despite the revenue decline. In 2022, the margin dropped sharply to 2.98%, reflecting the significant decrease in profitability. The margin rebounded strongly in 2023, reaching 17.57%, the highest in the period analyzed, before decreasing to 11.46% in 2024. This trend in margin aligns with the net operating profit, highlighting variability in operational efficiency and cost management.
- Overall Observations
- The data indicates a period marked by considerable volatility in profitability, with operating profit margins and net operating profit before taxes moving in tandem. Adjusted revenue experienced a decline early in the period, followed by a phase of recovery and stabilization. The peak in profitability observed in 2023 suggests a temporary improvement in operational performance, which was not fully sustained into 2024. These patterns may reflect external economic conditions, internal management actions, or a combination of both affecting company performance over time.
Turnover of Capital (TO)
International Business Machines Corp., 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) | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred income | ||||||
| Adjusted revenue | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 revenue ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenue
- The adjusted revenue demonstrates a fluctuating trend over the five-year period. It peaked in 2020 at 74,877 million USD, then experienced a notable decline in 2021 to 57,707 million USD. This was followed by a modest recovery from 2021 through 2023, with values increasing steadily to 63,313 million USD. However, in 2024, the revenue slightly declined again to 63,298 million USD, nearly reverting to the 2023 level. Overall, the adjusted revenue has shown variability with a substantial drop early in the period and a partial rebound afterward, stabilizing in the last two years.
- Invested Capital
- Invested capital shows a general downward trend with some fluctuations. Starting from 130,176 million USD in 2020, it dropped significantly to 110,083 million USD in 2021, continuing to decrease to 104,131 million USD in 2022. In 2023, there was a reversal as invested capital rose to 112,927 million USD before slightly decreasing again to 111,965 million USD in 2024. This suggests a reduction in capital investment following 2020, with a partial recovery in the later years but not returning to the initial high level.
- Turnover of Capital (TO)
- The turnover of capital ratio remained relatively stable throughout the period. Starting at 0.58 in 2020, it dipped to 0.52 in 2021, then returned to 0.58 in 2022. The ratio experienced minor fluctuation in the subsequent years, being 0.56 in 2023 and increasing slightly to 0.57 in 2024. This indicates a relatively consistent efficiency in utilizing invested capital to generate revenue, despite the fluctuations in both adjusted revenue and invested capital.
Effective Cash Tax Rate (CTR)
International Business Machines Corp., 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 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes show some fluctuation over the period analyzed. Beginning at 2,738 million USD in 2020, there is a notable decrease to 2,130 million USD in 2021. This is followed by a recovery in 2022 and 2023, reaching around 2,497 and 2,510 million USD respectively, before a slight decline to 2,356 million USD in 2024. Overall, cash operating taxes appear relatively stable but exhibit short-term variability.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes demonstrates considerable volatility across the years. In 2020, the value was 7,215 million USD, decreasing to 6,293 million USD in 2021. There is a sharp decline in 2022, with NOPBT dropping significantly to 1,787 million USD. The figure then experiences a substantial rebound in 2023, reaching 11,124 million USD, which is the highest level in the period, followed by a decrease to 7,251 million USD in 2024. This pattern suggests that earnings were strongly impacted by certain factors during 2022 but recovered markedly the next year.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate shows considerable variation. From 37.95% in 2020, it declines to 33.85% in 2021. A pronounced spike to 139.75% is observed in 2022, which is an abnormal rate indicating that taxes paid exceeded the pre-tax profit significantly, likely due to extraordinary items or adjustments. Following this anomaly, the CTR decreases sharply to 22.56% in 2023, then rises moderately to 32.49% in 2024. The fluctuations in tax rate correspond with the pronounced changes in operating profit, highlighting the impact of profitability and tax-related dynamics on the effective tax burden.