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.
Paying user area
Try for free
Paycom Software Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Net Profit Margin since 2014
- Operating Profit Margin since 2014
- Return on Assets (ROA) since 2014
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Paycom Software Inc. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Return on Invested Capital (ROIC)
Paycom Software Inc., ROIC calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
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 × ÷ =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes showed a positive trend over the five-year period, increasing from $172,096 thousand in 2018 to $297,371 thousand in 2022. There was a noticeable dip in 2020 to $176,158 thousand, but the figure recovered strongly in the subsequent years, reaching its highest level in 2022. Overall, NOPAT nearly doubled from 2018 to 2022, indicating improved profitability.
- Invested Capital
- Invested capital demonstrated a consistent upward trend throughout the period. Starting at $522,609 thousand in 2018, it increased steadily each year to reach $1,478,485 thousand by 2022. This represents an almost threefold increase over five years, reflecting significant investments or asset base growth.
- Return on Invested Capital (ROIC)
- Return on invested capital exhibited a declining trend from 32.93% in 2018 to 20.11% in 2022. The ROIC dropped sharply between 2018 and 2020, from 32.93% to 20.48%, and then stabilized around 20% in the subsequent years. This suggests that despite higher absolute profit and capital investment, the efficiency of capital use has decreased.
- Overall Analysis
- While net operating profit after taxes and invested capital both increased significantly over the five years, the declining ROIC indicates diminishing returns on the increased capital base. The company appears to be generating more absolute profit but at a lower rate of return relative to the invested capital. This may warrant a closer examination of capital deployment and operational efficiency to ensure sustainable profitability growth.
Decomposition of ROIC
Paycom Software 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 exhibited a decreasing trend from 32.61% in 2018 to 23.18% in 2020, indicating a reduction in operational profitability during this period. However, the margin improved in the subsequent years, rising to 25.38% in 2021 and further to 29.44% in 2022. Despite the recovery, the margin in 2022 remained below the initial 2018 level, suggesting partial restoration of operating efficiency.
- Turnover of Capital (TO)
- The turnover of capital ratio demonstrated a gradual decline over the five-year span, falling from 1.11 in 2018 to 0.9 in 2021 before slightly increasing to 0.94 in 2022. This declining trend implies a reduction in the efficiency with which capital was utilized to generate revenues, though there was a minor rebound in the most recent year.
- 1 – Effective Cash Tax Rate (CTR)
- The component representing (1 – effective cash tax rate) remained relatively stable from 2018 through 2021, fluctuating narrowly between approximately 89.2% and 91.1%, which means the effective tax rate stayed consistently around 8-9%. Notably, in 2022, this value declined to 72.6%, indicating a significant increase in the effective cash tax rate during that year.
- Return on Invested Capital (ROIC)
- ROIC experienced a marked decline from 32.93% in 2018 to 20.48% in 2020, reflecting diminishing returns on the company’s invested capital in the initial years. The ratio then stabilized somewhat, showing minimal variation between 20.48% and 20.11% from 2020 through 2022. Overall, the data points to a sustained lower return on capital after 2018.
Operating Profit Margin (OPM)
Paycom Software Inc., OPM calculation
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 revenues
= 100 × ÷ =
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes exhibited an overall upward trend from 2018 to 2022. There was a significant increase from $188,912 thousand in 2018 to $239,739 thousand in 2019. A decline occurred in 2020 to $197,458 thousand, followed by a recovery and further growth in the subsequent years, reaching a peak of $409,621 thousand in 2022. This indicates notable growth in operating profitability over the five-year period, despite the dip experienced in 2020.
- Adjusted Revenues
- Adjusted revenues showed consistent growth every year from 2018 to 2022. They increased from $579,363 thousand in 2018 to $749,264 thousand in 2019, then to $852,016 thousand in 2020, continuing upward to $1,070,124 thousand in 2021, and reaching $1,391,208 thousand in 2022. This steady increase suggests expanding sales or service activities year over year.
- Operating Profit Margin (OPM)
- The operating profit margin experienced fluctuations over the period under review. It started at 32.61% in 2018 and slightly decreased to 32% in 2019. A more pronounced decline was observed in 2020, dropping to 23.18%. However, margins improved again to 25.38% in 2021 and continued increasing to 29.44% in 2022. This pattern highlights a recovery in operational efficiency and profitability after a notable contraction in 2020.
- Summary
- Overall, the data reveals strong revenue growth coupled with increases in net operating profit before taxes and improvements in operating profit margin in the latter years. The dip in 2020 across these indicators may reflect external pressures or strategic adjustments, but subsequent years show marked recovery and strengthening of financial performance.
Turnover of Capital (TO)
Paycom Software Inc., TO calculation
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 revenues ÷ Invested capital
= ÷ =
- Adjusted revenues
- The adjusted revenues have consistently increased over the five-year period. Starting at 579,363 thousand US dollars in 2018, revenues climbed steadily each year, reaching 1,391,208 thousand US dollars by the end of 2022. This represents a strong upward growth trajectory, indicating improved sales performance or expanded business operations.
- Invested capital
- Invested capital also exhibited a continuous increase from 522,609 thousand US dollars in 2018 to 1,478,485 thousand US dollars in 2022. The growth in invested capital suggests that the company has been allocating more funds into its assets or operations, potentially to support the revenue growth observed.
- Turnover of capital (TO)
- The turnover of capital ratio shows a declining trend from 1.11 in 2018 to a low of 0.9 in 2021, with a slight recovery to 0.94 in 2022. This decrease implies that the efficiency with which the company uses its invested capital to generate revenues has diminished over time, despite overall revenue growth. The marginal improvement in 2022 might suggest efforts to enhance capital efficiency.
- Summary
- The company has demonstrated robust revenue and invested capital growth over the analyzed period, indicating expansion and increased investment in its operations. However, the declining turnover of capital ratio highlights a reduction in capital productivity, which may warrant further investigation to optimize asset utilization and preserve profitability margins as the scale increases.
Effective Cash Tax Rate (CTR)
Paycom Software Inc., CTR calculation
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 × ÷ =
- Cash Operating Taxes
- The cash operating taxes exhibited fluctuations from 2018 to 2022. Starting at $16,816 thousand in 2018, the value increased to $24,932 thousand in 2019, then declined to $21,299 thousand in 2020. It rose again to $27,310 thousand in 2021 and experienced a significant spike to $112,250 thousand in 2022. This sharp increase in 2022 represents a notable change compared to previous years.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes demonstrated an overall upward trend across the five years. Beginning at $188,912 thousand in 2018, it grew to $239,739 thousand in 2019. A decline occurred in 2020, reducing the amount to $197,458 thousand. Afterwards, the NOPBT increased substantially to $271,582 thousand in 2021 and further to $409,621 thousand in 2022. The growth between 2021 and 2022 was particularly pronounced.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate was relatively stable from 2018 through 2021, ranging narrowly between 8.9% and 10.79%. However, in 2022, the rate surged significantly to 27.4%, indicating a major increase in the proportion of operating profit paid as cash taxes in that year.
- Overall Analysis
- Throughout the observed period, net operating profit before taxes showed a general growth trend with a minor dip in 2020, while cash operating taxes and the effective cash tax rate remained relatively steady until a substantial increase in 2022. This rise in taxes alongside a higher cash tax rate suggests a change in tax obligations or tax strategy in the final year, impacting the after-tax profitability despite the strong operating profit performance.