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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- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2006
- Price to Operating Profit (P/OP) since 2006
- Analysis of Revenues
- Analysis of Debt
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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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| International Business Machines 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: 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 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited an overall upward trend during the analyzed period. Starting from 5,750 million USD at the end of 2018, it increased substantially to 8,254 million USD by the end of 2019. There was a decline in 2020, dropping to 6,937 million USD, which may reflect operational challenges or external factors impacting profitability. However, the value rebounded in subsequent years, reaching 9,129 million USD in 2021 and further increasing to 9,638 million USD by 2022. This recovery indicates resilience and an improvement in operational performance after the 2020 downturn.
- Invested Capital
- Invested capital has shown a consistent growth trend throughout the period. The value rose from 11,243 million USD in 2018 to 14,672 million USD in 2019 and then saw a significant jump to 19,854 million USD in 2020. The growth continued but at a slower pace, reaching 22,365 million USD in 2021. In 2022, there was a slight decline to 21,548 million USD. The increasing trend in invested capital indicates ongoing investments in business assets, although the small decrease in 2022 suggests a potential optimization or reduction in capital deployment.
- Return on Invested Capital (ROIC)
- The return on invested capital percentage experienced notable fluctuations over the period. It started at a relatively high 51.15% in 2018 and increased further to 56.26% in 2019, reflecting strong efficiency in generating returns from capital invested. In 2020, ROIC dropped sharply to 34.94%, corresponding with the decline in net operating profit after taxes and the increase in invested capital during the same year. The ratio partially recovered in the following years, rising to 40.82% in 2021 and reaching 44.73% in 2022. Despite the fluctuations, the later recovery suggests a gradual improvement in capital utilization efficiency.
- Summary and Insights
- The data indicate an initial period of robust profitability and capital efficiency through 2018 and 2019, with both NOPAT and ROIC peaking. The year 2020 showed a significant setback, with reduced profitability and efficiency alongside a substantial increase in invested capital, likely reflecting strategic adjustments under challenging economic conditions. Subsequent years demonstrated recovery in profitability and improving returns on invested capital, though not reaching the peak levels of the earlier years. The invested capital's slight decrease in 2022 may signal efforts to streamline asset use or manage capital more prudently. Overall, the patterns reveal resilience and adaptability in the company's financial performance following temporary disruptions.
Decomposition of ROIC
Mastercard Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × |
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 »
- Operating Profit Margin (OPM)
- The operating profit margin showed a generally strong performance over the five-year period. Starting at 48.97% in 2018, it increased significantly to a peak of 58.58% in 2019, indicating improved operational efficiency or profitability. It then declined somewhat in 2020 to 53.66%, before recovering to 57.28% in 2021. In 2022, there was a slight decrease to 54.73%, but the margin remained substantially higher than the initial figure in 2018. Overall, the operating profit margin ensured relatively high profitability throughout the period with some fluctuations.
- Turnover of Capital (TO)
- The turnover of capital ratio experienced a downward trend during the first three years, decreasing from 1.34 in 2018 to a low of 0.78 in 2020. This suggests a reduction in the efficiency with which invested capital was generating revenue during that period. However, from 2020 onwards, there was a gradual improvement, rising to 0.85 in 2021 and further to 1.03 in 2022. Despite this recovery, the turnover of capital in 2022 had not fully returned to the 2018 level.
- Effective Cash Tax Rate (1 – CTR)
- The effective cash tax rate exhibited relative stability with minor fluctuations. It was 78.17% in 2018, increased to a peak of around 83.6% between 2019 and 2021, and then declined to 79.12% in 2022. This indicates that the company maintained a consistently high level of taxed earnings over the period, with a slight decrease in the final year that may have marginally relieved tax pressures.
- Return on Invested Capital (ROIC)
- The return on invested capital showed notable variability. It started at a high 51.15% in 2018 and increased to 56.26% in 2019, reflecting strong returns on the capital employed. However, it then experienced a sharp decline to 34.94% in 2020, possibly due to operational challenges or capital base changes. This was followed by a gradual recovery to 40.82% in 2021 and further improvement to 44.73% in 2022. Despite this recovery trend, ROIC in 2022 remained below the levels observed in 2018 and 2019.
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 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net revenue | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| International Business Machines 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: 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 × ÷ =
4 Click competitor name to see calculations.
- Net operating profit before taxes (NOPBT)
- The net operating profit before taxes exhibited a generally upward trend over the period from 2018 to 2022. Starting at $7,356 million in 2018, the figure increased significantly to $9,905 million in 2019. Despite a decline to $8,293 million in 2020, the profit rebounded strongly in the subsequent years, reaching $10,911 million in 2021 and peaking at $12,181 million in 2022. This indicates overall growth in operating profitability despite the temporary dip in 2020.
- Adjusted net revenue
- The adjusted net revenue showed consistent growth across the years under review. From $15,022 million in 2018, revenue rose to $16,908 million in 2019. There was a slight decrease to $15,455 million in 2020, paralleling the dip seen in operating profit, which could suggest external challenges impacting the business that year. However, revenue recovered sharply in 2021 to $19,048 million and continued to increase substantially to $22,257 million in 2022, reflecting strong revenue generating capability and market demand.
- Operating profit margin (OPM)
- The operating profit margin exhibited some variability but generally remained robust. Beginning at 48.97% in 2018, the margin increased to 58.58% in 2019, representing enhanced operational efficiency or favorable cost management. It then declined to 53.66% in 2020, aligning with the reductions seen in both revenue and profit, before recovering to 57.28% in 2021. In 2022, the margin slightly decreased to 54.73%, indicating some moderation in operating efficiency but still remaining strong relative to the starting point.
- Overall Analysis
- The data reflects a company that experienced strong growth in both adjusted net revenue and net operating profit before taxes over the five-year period, with a notable setback in 2020 likely related to broader economic conditions. The recovery in 2021 and 2022 was marked and suggests resilience and effective management. While operating profit margin fluctuated, it consistently stayed above 48%, showcasing sustained operational profitability. The trends suggest effective cost control mechanisms and a robust ability to generate profits from revenue, even amidst challenging periods.
Turnover of Capital (TO)
Mastercard Inc., TO calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net revenue | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Fair Isaac Corp. | ||||||
| International Business Machines 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: 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
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Net Revenue
- The adjusted net revenue displayed an overall increasing trend from 2018 through 2022. Starting at 15,022 million US dollars in 2018, it rose to 16,908 million in 2019. A dip occurred in 2020, where the revenue decreased to 15,455 million, likely reflecting market or economic challenges during that period. Subsequently, the revenue recovered significantly in 2021 to 19,048 million and further increased in 2022 to 22,257 million, marking the highest value in the period analyzed.
- Invested Capital
- The invested capital showed a consistent increase from 2018 to 2021, growing from 11,243 million US dollars to 22,365 million. This represents a near doubling over the four years. However, in 2022, invested capital slightly declined to 21,548 million after reaching its peak in 2021. This minor decrease could indicate a strategic adjustment or reduced capital expenditures during the most recent year.
- Turnover of Capital (TO)
- The turnover of capital ratio, which measures the efficiency of capital investment in generating revenue, declined sharply from 1.34 in 2018 to 0.78 in 2020. This decrease suggests reduced efficiency or slower utilization of the capital invested over these years. From 2020 onwards, the ratio displayed a gradual recovery, increasing to 0.85 in 2021 and further to 1.03 in 2022. Despite this improvement, the 2022 turnover ratio remains below the 2018 level, indicating that capital utilization efficiency has not yet returned to its earlier strong performance.
- Overall Insights
- The data indicates that while adjusted net revenue has generally expanded over the five-year period with a notable rebound post-2020, the invested capital increased considerably but exhibited a slight pullback in the last year. The reduced turnover of capital ratio during the middle years reflects a period of capital investment growth outpacing revenue generation efficiency, but a recovery trend is observable toward 2022. This pattern may suggest a phase of strategic investment and subsequent optimization of capital usage to support growing revenue streams.
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 | ||||||
| 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. | ||||||
| International Business Machines 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: 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 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes demonstrated a fluctuating pattern over the observed period. Starting at $1,606 million in 2018, there was a slight increase to $1,651 million in 2019, followed by a decrease to $1,356 million in 2020. Subsequently, the amount rose again to $1,782 million in 2021 and increased more substantially to $2,543 million in 2022. This suggests variability in taxable income or changes in tax regulations impacting the taxes paid year over year.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibited an overall upward trend with some fluctuations. It increased from $7,356 million in 2018 to $9,905 million in 2019, then experienced a decline to $8,293 million in 2020. The profit recovered significantly in the following years, rising to $10,911 million in 2021 and reaching $12,181 million in 2022. This pattern suggests resilience and growth potential, possibly influenced by external economic factors or operational adjustments.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate showed a decreasing trend from 21.83% in 2018 to 16.34% in 2021, indicating progressively lower tax burden relative to profit during this period. However, the tax rate increased to 20.88% in 2022, approaching the level observed in 2018. This increase could be attributed to changes in tax policy or a shift in the company's earnings mix.
- Summary Insights
- Overall, the data reveals a pattern of increasing operational profitability with some interruptions, notably in 2020. Cash operating taxes generally followed the profit trend but with some lag and variability. The effective tax rate decreased for several years before rising again in 2022, which may have impacted the net tax amount paid despite profitability gains. These trends highlight the dynamic relationship between profitability, taxation, and external factors influencing financial performance.