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)
Raytheon Co., ROIC calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,427) | 3,010) | 2,393) | 2,456) | 2,171) | |
| Invested capital2 | 26,688) | 26,081) | 23,548) | 23,509) | 22,413) | |
| Performance Ratio | ||||||
| ROIC3 | 12.84% | 11.54% | 10.16% | 10.45% | 9.68% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2019 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 3,427 ÷ 26,688 = 12.84%
4 Click competitor name to see calculations.
An analysis of the financial performance from 2015 to 2019 reveals a consistent upward trajectory in capital efficiency and profitability. Despite a minor fluctuation in 2017, the company demonstrated a sustained ability to increase its return on invested capital, indicating that the growth in operating profits outpaced the expansion of the invested capital base.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited an overall growth trend, rising from 2,171 million USD in 2015 to 3,427 million USD by 2019. While a slight decrease occurred in 2017, where profits dipped to 2,393 million USD, the subsequent years saw significant acceleration, with a notable surge in 2018 and 2019.
- Invested Capital
- The capital base grew steadily over the five-year period, increasing from 22,413 million USD in 2015 to 26,688 million USD in 2019. The most substantial increase in invested capital occurred between 2017 and 2018, suggesting a period of intensified investment in assets or operations to support future growth.
- Return on Invested Capital (ROIC)
- ROIC improved from 9.68% in 2015 to 12.84% in 2019. The ratio mirrored the movement of NOPAT, experiencing a marginal decline to 10.16% in 2017 before climbing steadily to reach its peak in 2019. This trend indicates an enhancement in the efficiency with which the company deployed its capital to generate operating returns.
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Decomposition of ROIC
Raytheon Co., decomposition of ROIC
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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) exhibits a general upward trajectory over the five-year period, increasing from 9.68% in 2015 to 12.84% by 2019. This growth indicates an improved ability to generate returns from the capital deployed in the business, despite some mid-period volatility.
- Operating Profit Margin (OPM)
- The operating profit margin remained relatively stable with some fluctuations, starting at 13.13% in 2015 and reaching a peak of 14.22% in 2019. A period of contraction occurred between 2016 and 2018, where the margin dipped to a low of 12.33%, before recovering strongly in the final year of the analysis.
- Turnover of Capital (TO)
- Capital turnover demonstrates minimal variance, consistently oscillating between 1.02 and 1.09. This stability suggests that the increase in ROIC was not primarily driven by gains in asset utilization or operational efficiency in generating revenue per unit of capital, but rather by other components of the return decomposition.
- Tax Efficiency (1 – Effective Cash Tax Rate)
- A significant driver of the ROIC increase is observed in the effective cash tax rate component. The value of 1 minus the effective cash tax rate rose from 71.12% in 2015 to a peak of 90.20% in 2018, before settling at 82.62% in 2019. This upward shift indicates a reduction in the cash tax burden, which directly amplified the after-tax return on invested capital.
- ROIC Synthesis
- The expansion of ROIC from 2017 to 2019 was supported by a dual effect: the recovery and expansion of the operating profit margin and a sustained increase in tax efficiency. While capital turnover remained flat, the combination of higher operational profitability and a lower cash tax burden accelerated the growth of the overall return profile.
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Operating Profit Margin (OPM)
Raytheon Co., OPM calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,427) | 3,010) | 2,393) | 2,456) | 2,171) | |
| Add: Cash operating taxes2 | 721) | 327) | 939) | 840) | 881) | |
| Net operating profit before taxes (NOPBT) | 4,147) | 3,337) | 3,332) | 3,296) | 3,052) | |
| Net sales | 29,176) | 27,058) | 25,348) | 24,069) | 23,247) | |
| Profitability Ratio | ||||||
| OPM3 | 14.22% | 12.33% | 13.15% | 13.69% | 13.13% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
OPM = 100 × NOPBT ÷ Net sales
= 100 × 4,147 ÷ 29,176 = 14.22%
4 Click competitor name to see calculations.
The financial performance from 2015 through 2019 is characterized by consistent revenue expansion accompanied by fluctuating operating efficiency, culminating in a peak in profitability by the end of the period.
- Revenue Trends
- Net sales demonstrated steady year-over-year growth, increasing from US$ 23,247 million in 2015 to US$ 29,176 million in 2019. This indicates a consistent expansion of the top line throughout the five-year duration.
- Operating Profitability
- Net operating profit before taxes (NOPBT) followed a general upward trajectory, although growth stalled between 2017 and 2018, with values remaining nearly stagnant at approximately US$ 3,330 million. A substantial increase is observed in 2019, where NOPBT rose to US$ 4,147 million.
- Operating Profit Margin (OPM) Analysis
- The operating profit margin exhibited volatility during the period. After an initial increase to 13.69% in 2016, the margin experienced a two-year decline, reaching a low of 12.33% in 2018. This suggests a period where operating costs grew disproportionately to revenue. However, a significant recovery occurred in 2019, with the OPM climbing to 14.22%, the highest level recorded in the five-year sequence.
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Turnover of Capital (TO)
Raytheon Co., TO calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 29,176) | 27,058) | 25,348) | 24,069) | 23,247) | |
| Invested capital1 | 26,688) | 26,081) | 23,548) | 23,509) | 22,413) | |
| Efficiency Ratio | ||||||
| TO2 | 1.09 | 1.04 | 1.08 | 1.02 | 1.04 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Invested capital. See details »
2 2019 Calculation
TO = Net sales ÷ Invested capital
= 29,176 ÷ 26,688 = 1.09
3 Click competitor name to see calculations.
An analysis of financial performance from 2015 to 2019 reveals a consistent trajectory of revenue expansion paired with measured increases in invested capital. The operational efficiency, as measured by the turnover of capital, remained relatively stable, reflecting a balanced relationship between asset growth and sales generation over the five-year period.
- Net Sales Growth
- Net sales exhibited a continuous upward trend, increasing from US$ 23,247 million in 2015 to US$ 29,176 million by 2019. The growth pattern was steady, with a notable acceleration in the pace of increase during the 2018 and 2019 fiscal years.
- Invested Capital Trends
- Invested capital rose from US$ 22,413 million in 2015 to US$ 26,688 million in 2019. While the increase was gradual for the first three years, a significant expansion occurred in 2018, where invested capital grew by approximately 10.7%, indicating a substantial allocation of resources during that period.
- Turnover of Capital Efficiency
- The turnover of capital ratio fluctuated within a narrow corridor, ranging from a low of 1.02 in 2016 to a high of 1.09 in 2019. Although the ratio experienced temporary declines in 2016 and 2018, the overall trend concluded with an improvement in efficiency. The peak ratio in 2019 suggests that sales growth eventually outpaced the expansion of the capital base, optimizing the productivity of the invested assets.
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Effective Cash Tax Rate (CTR)
Raytheon Co., CTR calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 3,427) | 3,010) | 2,393) | 2,456) | 2,171) | |
| Add: Cash operating taxes2 | 721) | 327) | 939) | 840) | 881) | |
| Net operating profit before taxes (NOPBT) | 4,147) | 3,337) | 3,332) | 3,296) | 3,052) | |
| Tax Rate | ||||||
| CTR3 | 17.38% | 9.80% | 28.17% | 25.49% | 28.88% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2019 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 721 ÷ 4,147 = 17.38%
4 Click competitor name to see calculations.
An analysis of the period from 2015 to 2019 reveals a diverging trend between operating profitability and the actual cash tax burden.
- Net Operating Profit Before Taxes (NOPBT)
- A consistent upward trajectory is evident in NOPBT, which increased from US$ 3,052 million in 2015 to US$ 4,147 million in 2019. The growth was gradual between 2015 and 2018, followed by a substantial acceleration in 2019, where profit rose by approximately 24% over the previous year.
- Cash Operating Taxes
- Cash tax payments remained relatively stable between 2015 and 2017, fluctuating between US$ 840 million and US$ 939 million. A significant contraction occurred in 2018, with payments dropping to US$ 327 million, before recovering to US$ 721 million in 2019.
- Effective Cash Tax Rate (CTR)
- The CTR exhibited notable volatility. After maintaining a range of 25.49% to 28.88% from 2015 through 2017, the rate plummeted to 9.80% in 2018. In 2019, the rate rose to 17.38%, although this figure remained considerably lower than the baseline established in the first three years of the period.
The disparity between the steadily rising NOPBT and the fluctuating CTR suggests a significant reduction in the cash tax burden relative to operating profits, particularly from 2018 onward. The 2019 results are particularly notable, as the highest level of operating profit was achieved while the effective cash tax rate remained well below the 2015-2017 average.
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