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)
Mastercard 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 millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 9,638) | 9,129) | 6,937) | 8,254) | 5,750) | |
| Invested capital2 | 21,548) | 22,365) | 19,854) | 14,672) | 11,243) | |
| Performance Ratio | ||||||
| ROIC3 | 44.73% | 40.82% | 34.94% | 56.26% | 51.15% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Accenture PLC | 23.93% | 25.83% | 26.30% | — | — | |
| Adobe Inc. | 26.93% | 29.44% | 21.67% | — | — | |
| AppLovin Corp. | -3.27% | 0.83% | — | — | — | |
| Cadence Design Systems Inc. | 23.98% | 24.26% | — | — | — | |
| Datadog Inc. | 8.75% | 16.66% | — | — | — | |
| International Business Machines Corp. | -0.61% | 3.86% | — | — | — | |
| Intuit Inc. | 9.30% | 17.64% | — | — | — | |
| Microsoft Corp. | 36.59% | 45.56% | — | — | — | |
| Oracle Corp. | 9.70% | 17.55% | — | — | — | |
| Palantir Technologies Inc. | -7.21% | -14.60% | — | — | — | |
| Palo Alto Networks Inc. | 19.73% | 11.48% | — | — | — | |
| Salesforce Inc. | 5.42% | 8.25% | — | — | — | |
| ServiceNow Inc. | 17.69% | 18.88% | — | — | — | |
| Synopsys Inc. | 17.54% | 11.52% | 11.63% | — | — | |
| Workday Inc. | 6.56% | 1.38% | — | — | — | |
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 × 9,638 ÷ 21,548 = 44.73%
4 Click competitor name to see calculations.
The return on invested capital (ROIC) exhibited significant volatility between 2018 and 2022, characterized by an initial peak, a sharp contraction, and a subsequent recovery phase. While the metric remained high throughout the period, the fluctuations reflect changing dynamics between operating profitability and capital deployment.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trajectory in NOPAT is observed, increasing from 5,750 million USD in 2018 to 9,638 million USD by 2022. A notable exception occurred in 2020, where profit declined to 6,937 million USD from the previous year's 8,254 million USD. Following this dip, profitability recovered strongly, reaching its five-year peak in 2022.
- Invested Capital
- Invested capital showed a consistent expansionary trend from 2018 through 2021, rising from 11,243 million USD to 22,365 million USD. The most significant increase occurred between 2019 and 2020, where capital grew by approximately 35%. In 2022, a slight contraction was recorded, with invested capital decreasing to 21,548 million USD.
- Return on Invested Capital (ROIC) Analysis
- The ROIC peaked in 2019 at 56.26%, driven by strong profit growth relative to the capital base. A substantial decline to 34.94% was recorded in 2020, resulting from the simultaneous occurrence of decreased NOPAT and a sharp increase in invested capital. Since 2020, a steady recovery has been observed, with ROIC rising to 40.82% in 2021 and further improving to 44.73% in 2022. This recovery is attributed to the combination of record-high NOPAT and a reduction in the total invested capital base.
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Decomposition of ROIC
Mastercard 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 cyclical pattern between 2018 and 2022, characterized by a peak in 2019, a significant contraction in 2020, and a subsequent recovery phase. ROIC reached a high of 56.26% in 2019 before dropping to a period low of 34.94% in 2020, eventually climbing back to 44.73% by the end of 2022.
- Operating Profit Margin (OPM)
- Operational efficiency remained consistently high throughout the period, with margins staying above 48%. A peak in profitability was observed in 2019 at 58.58%. While there was a slight compression in 2020 to 53.66%, the margin remained robust, suggesting that the core operational ability to generate profit from revenue remained stable despite external pressures.
- Turnover of Capital (TO)
- Capital turnover emerged as the primary driver of ROIC volatility. A steady decline was observed from 1.34 in 2018 to a low of 0.78 in 2020. This reduction in asset efficiency coincided directly with the decline in ROIC, indicating that the drop in return was caused more by a decrease in capital productivity than by a collapse in operating margins. A recovery trend followed, with turnover improving to 1.03 by 2022.
- Effective Cash Tax Rate Factor (1 - CTR)
- The after-tax component of the ROIC decomposition remained relatively stable. The value fluctuated within a narrow range, peaking at 83.66% in 2021 and ending at 79.12% in 2022. Because of this stability, the cash tax rate had a negligible impact on the overall fluctuations of the ROIC compared to the movements in capital turnover and profit margins.
The decomposition of the return indicates that the 2020 downturn in ROIC was predominantly a function of reduced capital turnover. The subsequent recovery in ROIC through 2021 and 2022 was driven by the restoration of capital efficiency, supported by the maintenance of strong operating profit margins.
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Operating Profit Margin (OPM)
Mastercard 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 millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 9,638) | 9,129) | 6,937) | 8,254) | 5,750) | |
| Add: Cash operating taxes2 | 2,543) | 1,782) | 1,356) | 1,651) | 1,606) | |
| Net operating profit before taxes (NOPBT) | 12,181) | 10,911) | 8,293) | 9,905) | 7,356) | |
| Net revenue | 22,237) | 18,884) | 15,301) | 16,883) | 14,950) | |
| Add: Increase (decrease) in deferred revenue | 20) | 164) | 154) | 25) | 72) | |
| Adjusted net revenue | 22,257) | 19,048) | 15,455) | 16,908) | 15,022) | |
| Profitability Ratio | ||||||
| OPM3 | 54.73% | 57.28% | 53.66% | 58.58% | 48.97% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Accenture PLC | 15.48% | 16.65% | 16.59% | — | — | |
| Adobe Inc. | 36.56% | 40.89% | 34.42% | — | — | |
| AppLovin Corp. | -1.60% | 5.23% | — | — | — | |
| Cadence Design Systems Inc. | 32.28% | 28.51% | — | — | — | |
| Datadog Inc. | 6.57% | 13.48% | — | — | — | |
| International Business Machines Corp. | 3.11% | 11.04% | — | — | — | |
| Intuit Inc. | 21.00% | 28.02% | — | — | — | |
| Microsoft Corp. | 43.28% | 43.49% | — | — | — | |
| Oracle Corp. | 24.11% | 40.03% | — | — | — | |
| Palantir Technologies Inc. | -8.42% | -23.57% | — | — | — | |
| Palo Alto Networks Inc. | 23.90% | 16.95% | — | — | — | |
| Salesforce Inc. | 16.42% | 20.31% | — | — | — | |
| ServiceNow Inc. | 14.87% | 17.20% | — | — | — | |
| Synopsys Inc. | 27.91% | 22.47% | 22.28% | — | — | |
| Workday Inc. | 8.82% | 2.23% | — | — | — | |
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 revenue
= 100 × 12,181 ÷ 22,257 = 54.73%
4 Click competitor name to see calculations.
The analysis of operational performance from 2018 to 2022 reveals a trajectory of growth in both absolute profitability and revenue, characterized by a temporary contraction in 2020 followed by a robust recovery.
- Revenue and Profitability Trends
- Adjusted net revenue grew from 15,022 million USD in 2018 to 22,257 million USD by 2022. This expansion is mirrored by the net operating profit before taxes (NOPBT), which increased from 7,356 million USD to 12,181 million USD over the same period. A notable disruption occurred in 2020, where NOPBT declined to 8,293 million USD and adjusted net revenue dropped to 15,455 million USD, before rebounding sharply in 2021 and 2022.
- Operating Profit Margin (OPM) Dynamics
- The operating profit margin exhibited volatility while maintaining a high baseline. After starting at 48.97% in 2018, the margin reached a peak of 58.58% in 2019. A compression to 53.66% was observed in 2020, aligning with the decline in absolute revenue and profit. While the margin recovered to 57.28% in 2021, it moderated slightly to 54.73% in 2022, despite the company achieving its highest NOPBT and revenue figures of the five-year period.
- Operational Efficiency Analysis
- The divergence between record-high absolute profit in 2022 and a lower operating margin relative to 2021 indicates that operating expenses grew at a slightly faster rate than adjusted net revenue during the final year. Nevertheless, the consistency of the margin remaining above 50% from 2019 through 2022 demonstrates sustained operational efficiency and strong pricing power.
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Turnover of Capital (TO)
Mastercard 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 millions) | ||||||
| Net revenue | 22,237) | 18,884) | 15,301) | 16,883) | 14,950) | |
| Add: Increase (decrease) in deferred revenue | 20) | 164) | 154) | 25) | 72) | |
| Adjusted net revenue | 22,257) | 19,048) | 15,455) | 16,908) | 15,022) | |
| Invested capital1 | 21,548) | 22,365) | 19,854) | 14,672) | 11,243) | |
| Efficiency Ratio | ||||||
| TO2 | 1.03 | 0.85 | 0.78 | 1.15 | 1.34 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Accenture PLC | 2.08 | 1.95 | 1.97 | — | — | |
| Adobe Inc. | 0.86 | 0.80 | 0.70 | — | — | |
| AppLovin Corp. | 0.53 | 0.50 | — | — | — | |
| Cadence Design Systems Inc. | 1.00 | 0.98 | — | — | — | |
| Datadog Inc. | 1.45 | 1.26 | — | — | — | |
| International Business Machines Corp. | 0.58 | 0.53 | — | — | — | |
| Intuit Inc. | 0.52 | 0.79 | — | — | — | |
| Microsoft Corp. | 1.04 | 1.20 | — | — | — | |
| Oracle Corp. | 0.54 | 0.51 | — | — | — | |
| Palantir Technologies Inc. | 0.60 | 0.61 | — | — | — | |
| Palo Alto Networks Inc. | 0.86 | 0.74 | — | — | — | |
| Salesforce Inc. | 0.36 | 0.44 | — | — | — | |
| ServiceNow Inc. | 1.24 | 1.16 | — | — | — | |
| Synopsys Inc. | 0.71 | 0.63 | 0.58 | — | — | |
| Workday Inc. | 0.74 | 0.77 | — | — | — | |
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 revenue ÷ Invested capital
= 22,257 ÷ 21,548 = 1.03
3 Click competitor name to see calculations.
The analysis of capital efficiency between 2018 and 2022 reveals a U-shaped trend in the turnover of capital, reflecting a period of aggressive capital expansion followed by an operational recovery. While adjusted net revenue demonstrated long-term growth, the efficiency with which invested capital generated that revenue fluctuated significantly during the period.
- Adjusted Net Revenue Trends
- Revenue increased from 15,022 million USD in 2018 to 22,257 million USD by 2022. A temporary contraction was observed in 2020, where revenue declined to 15,455 million USD, before entering a period of accelerated growth in 2021 and 2022.
- Invested Capital Deployment
- Invested capital showed a consistent upward trajectory from 2018 through 2021, rising from 11,243 million USD to a peak of 22,365 million USD. This expansion represents a significant increase in the capital base, which was followed by a slight contraction to 21,548 million USD in 2022.
- Turnover of Capital (TO) Dynamics
- The turnover ratio declined from 1.34 in 2018 to a low of 0.78 in 2020. This decline was the result of invested capital growing at a faster rate than adjusted net revenue. However, a recovery phase is evident from 2021 onward, with the ratio improving to 1.03 by 2022. This suggests that the recent surge in revenue, combined with a stabilizing capital base, has enhanced the productivity of the invested capital.
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Effective Cash Tax Rate (CTR)
Mastercard 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 millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 9,638) | 9,129) | 6,937) | 8,254) | 5,750) | |
| Add: Cash operating taxes2 | 2,543) | 1,782) | 1,356) | 1,651) | 1,606) | |
| Net operating profit before taxes (NOPBT) | 12,181) | 10,911) | 8,293) | 9,905) | 7,356) | |
| Tax Rate | ||||||
| CTR3 | 20.88% | 16.34% | 16.35% | 16.67% | 21.83% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Accenture PLC | 25.55% | 20.47% | 19.34% | — | — | |
| Adobe Inc. | 14.22% | 10.28% | 9.63% | — | — | |
| AppLovin Corp. | — | 68.18% | — | — | — | |
| Cadence Design Systems Inc. | 25.88% | 13.59% | — | — | — | |
| Datadog Inc. | 7.98% | 1.83% | — | — | — | |
| International Business Machines Corp. | 133.97% | 33.45% | — | — | — | |
| Intuit Inc. | 14.74% | 20.15% | — | — | — | |
| Microsoft Corp. | 18.98% | 13.05% | — | — | — | |
| Oracle Corp. | 26.20% | 13.28% | — | — | — | |
| Palantir Technologies Inc. | — | — | — | — | — | |
| Palo Alto Networks Inc. | 3.82% | 8.83% | — | — | — | |
| Salesforce Inc. | 8.32% | 6.83% | — | — | — | |
| ServiceNow Inc. | 4.41% | 5.03% | — | — | — | |
| Synopsys Inc. | 11.45% | 18.39% | 10.36% | — | — | |
| Workday Inc. | -0.77% | 19.25% | — | — | — | |
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 × 2,543 ÷ 12,181 = 20.88%
4 Click competitor name to see calculations.
The effective cash tax rate exhibited a U-shaped trajectory between 2018 and 2022. After an initial decrease from 21.83% in 2018, the rate remained remarkably stable for three consecutive years before increasing to 20.88% in 2022.
- Net Operating Profit Before Taxes (NOPBT) Trends
- An overall upward trend in profitability is observed, with NOPBT growing from US$ 7,356 million in 2018 to US$ 12,181 million in 2022. A notable contraction occurred in 2020, where NOPBT declined to US$ 8,293 million, followed by a robust recovery and continued growth in the subsequent two years.
- Cash Operating Taxes Analysis
- Cash tax payments generally tracked the direction of operating profit, with a visible dip in 2020 to US$ 1,356 million. However, 2022 marked a significant surge in cash taxes, reaching US$ 2,543 million, which represents a substantial increase compared to the previous four-year average.
- Effective Cash Tax Rate (CTR) Dynamics
- The CTR experienced a period of compression between 2019 and 2021, maintaining a narrow range between 16.34% and 16.67%. This indicates a period of consistent tax efficiency. The return to 20.88% in 2022 suggests a shift in the tax burden or the expiration of certain tax advantages, as the growth in cash taxes outpaced the growth in NOPBT during that final period.
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