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)
Stryker Corp., ROIC calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,015) | 1,867) | 2,347) | 2,098) | 1,187) | |
| Invested capital2 | 26,516) | 27,132) | 23,274) | 20,767) | 17,502) | |
| Performance Ratio | ||||||
| ROIC3 | 7.60% | 6.88% | 10.09% | 10.10% | 6.78% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Abbott Laboratories | 11.30% | — | — | — | — | |
| Elevance Health Inc. | 11.26% | — | — | — | — | |
| Intuitive Surgical Inc. | 37.63% | — | — | — | — | |
| Medtronic PLC | 5.59% | — | — | — | — | |
| UnitedHealth Group Inc. | 13.51% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2021 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,015 ÷ 26,516 = 7.60%
4 Click competitor name to see calculations.
The analysis of Return on Invested Capital (ROIC) from 2017 to 2021 reveals a period of volatility characterized by a sharp peak in capital efficiency followed by a contraction and a subsequent partial recovery. The overall trend indicates that while the company successfully scaled its operational profitability in the early years of the period, the efficiency of its capital deployment faced pressure toward the end of the timeframe.
- Net Operating Profit After Taxes (NOPAT)
- A strong growth trend is observed from 2017 to 2019, with NOPAT increasing from 1,187 million to 2,347 million. This growth was interrupted in 2020, when NOPAT declined to 1,867 million, before recovering to 2,015 million by the end of 2021.
- Invested Capital
- Invested capital experienced a consistent expansion between 2017 and 2020, rising from 17,502 million to 27,132 million. This suggests a period of aggressive investment or acquisition activity. A slight contraction in the capital base occurred in 2021, with the value decreasing to 26,516 million.
- Return on Invested Capital (ROIC)
- The ROIC rose significantly from 6.78% in 2017 to a peak of 10.10% in 2018, maintaining a stable level of 10.09% in 2019. A sharp decline to 6.88% occurred in 2020, a result of the simultaneous decrease in NOPAT and the peak in invested capital. A modest recovery to 7.60% was observed in 2021, driven by both an increase in operating profit and a reduction in total invested capital.
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Decomposition of ROIC
Stryker Corp., decomposition of ROIC
Based on: 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), 10-K (reporting date: 2017-12-31).
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 significant volatility between 2017 and 2021, characterized by a sharp increase in 2018, stability in 2019, a substantial contraction in 2020, and a partial recovery in 2021. While ROIC peaked at 10.10% in 2018, it ended the period at 7.60%, reflecting an inconsistent trajectory in value creation relative to invested capital.
- Operating Profit Margin (OPM)
- Operating efficiency remained relatively stable from 2017 to 2019, fluctuating within a narrow range between 18.18% and 18.49%. However, a notable downward trend emerged starting in 2020, with the margin dropping to 15.48% and continuing to decline to 15.19% by the end of 2021. This indicates a compression in operational profitability during the latter part of the period.
- Turnover of Capital (TO)
- Capital efficiency showed a general decline from 0.71 in 2017 to a low of 0.53 in 2020. This suggests a period of decreased asset productivity or an increase in the capital base that did not immediately yield proportional revenue growth. A significant recovery occurred in 2021, with the ratio returning to 0.65, aligning closely with 2018 and 2019 levels.
- Tax Efficiency (1 – Effective Cash Tax Rate)
- The after-tax component experienced a dramatic shift between 2017 and 2018, rising from 52.45% to 83.41%. This factor remained high through 2020, peaking at 85.96% in 2019, before moderating to 77.56% in 2021. The sharp increase in 2018 served as a primary driver for the jump in ROIC during that year.
- Integrated ROIC Decomposition
- The analysis indicates that the ROIC peak in 2018 was predominantly driven by tax efficiency gains rather than operational or capital productivity improvements. The decline in ROIC in 2020 was a result of a simultaneous contraction in both operating margins and capital turnover. The subsequent recovery in 2021 was fueled specifically by the rebound in capital turnover, which offset the continuing decline in operating profit margins.
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Operating Profit Margin (OPM)
Stryker Corp., OPM calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,015) | 1,867) | 2,347) | 2,098) | 1,187) | |
| Add: Cash operating taxes2 | 583) | 354) | 383) | 417) | 1,076) | |
| Net operating profit before taxes (NOPBT) | 2,598) | 2,221) | 2,731) | 2,516) | 2,263) | |
| Net sales | 17,108) | 14,351) | 14,884) | 13,601) | 12,444) | |
| Profitability Ratio | ||||||
| OPM3 | 15.19% | 15.48% | 18.35% | 18.49% | 18.18% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Abbott Laboratories | 20.37% | — | — | — | — | |
| Elevance Health Inc. | 6.58% | — | — | — | — | |
| Intuitive Surgical Inc. | 33.56% | — | — | — | — | |
| Medtronic PLC | 16.48% | — | — | — | — | |
| UnitedHealth Group Inc. | 8.33% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2021 Calculation
OPM = 100 × NOPBT ÷ Net sales
= 100 × 2,598 ÷ 17,108 = 15.19%
4 Click competitor name to see calculations.
An analysis of the operating profit margin reveals a period of relative stability followed by a notable contraction. From 2017 through 2019, the operating margin remained consistent, but experienced a significant decline starting in 2020 that persisted into 2021 despite a strong recovery in top-line revenue.
- Revenue Trajectory
- Net sales demonstrated a general upward trend, rising from US$ 12,444 million in 2017 to US$ 17,108 million by 2021. While a slight contraction occurred in 2020, the subsequent increase in 2021 represented the largest single-year growth in the period analyzed.
- Operating Profit Stability (2017–2019)
- During the first three years, the operating profit margin was characterized by stability, fluctuating within a narrow range between 18.18% and 18.49%. Net operating profit before taxes (NOPBT) grew steadily during this window, reaching a peak of US$ 2,731 million in 2019.
- Margin Compression (2020–2021)
- A sharp decline in operational efficiency is observed in 2020, with the operating profit margin dropping to 15.48% as NOPBT fell to US$ 2,221 million. Although NOPBT recovered to US$ 2,598 million in 2021, the operating profit margin continued to compress to 15.19%. This divergence indicates that the cost of generating revenue increased disproportionately to the growth in net sales during the recovery period.
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Turnover of Capital (TO)
Stryker Corp., TO calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net sales | 17,108) | 14,351) | 14,884) | 13,601) | 12,444) | |
| Invested capital1 | 26,516) | 27,132) | 23,274) | 20,767) | 17,502) | |
| Efficiency Ratio | ||||||
| TO2 | 0.65 | 0.53 | 0.64 | 0.65 | 0.71 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Abbott Laboratories | 0.69 | — | — | — | — | |
| Elevance Health Inc. | 2.14 | — | — | — | — | |
| Intuitive Surgical Inc. | 1.27 | — | — | — | — | |
| Medtronic PLC | 0.42 | — | — | — | — | |
| UnitedHealth Group Inc. | 2.04 | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 Invested capital. See details »
2 2021 Calculation
TO = Net sales ÷ Invested capital
= 17,108 ÷ 26,516 = 0.65
3 Click competitor name to see calculations.
The analysis of capital efficiency from 2017 to 2021 reveals a period of declining asset utilization followed by a significant recovery in the final year. The overall trend indicates that invested capital grew at a rate exceeding the growth of net sales for the majority of the period, resulting in a contraction of the turnover ratio.
- Net Sales Trends
- Revenue exhibited a general upward trajectory, rising from US$ 12,444 million in 2017 to US$ 17,108 million in 2021. A temporary contraction occurred in 2020, where sales fell to US$ 14,351 million from the previous year's US$ 14,884 million, before rebounding sharply in 2021.
- Invested Capital Growth
- Invested capital saw a consistent and substantial increase from 2017 to 2020, growing from US$ 17,502 million to a peak of US$ 27,132 million. This represents a significant expansion of the capital base. In 2021, a slight reduction in invested capital was noted, bringing the figure to US$ 26,516 million.
- Turnover of Capital Analysis
- The turnover ratio experienced a steady decline from 0.71 in 2017 to a low of 0.53 in 2020. This decline suggests that each dollar of invested capital generated progressively less revenue during this interval. However, 2021 marked a reversal of this trend, with the ratio recovering to 0.65, driven by the simultaneous increase in net sales and a marginal reduction in the invested capital base.
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Effective Cash Tax Rate (CTR)
Stryker Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,015) | 1,867) | 2,347) | 2,098) | 1,187) | |
| Add: Cash operating taxes2 | 583) | 354) | 383) | 417) | 1,076) | |
| Net operating profit before taxes (NOPBT) | 2,598) | 2,221) | 2,731) | 2,516) | 2,263) | |
| Tax Rate | ||||||
| CTR3 | 22.44% | 15.94% | 14.04% | 16.59% | 47.55% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Abbott Laboratories | 20.05% | — | — | — | — | |
| Elevance Health Inc. | 20.22% | — | — | — | — | |
| Intuitive Surgical Inc. | 11.76% | — | — | — | — | |
| Medtronic PLC | 18.59% | — | — | — | — | |
| UnitedHealth Group Inc. | 20.32% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2021 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 583 ÷ 2,598 = 22.44%
4 Click competitor name to see calculations.
The effective cash tax rate (CTR) exhibited significant volatility over the five-year period, characterized by a sharp decline following 2017 and a subsequent gradual increase through 2021. While net operating profit before taxes (NOPBT) demonstrated a general growth trajectory prior to 2020, the cash tax obligations did not move in linear correlation with operating profitability.
- Effective Cash Tax Rate Trends
- A substantial reduction in the CTR is observed between 2017 and 2018, where the rate dropped from 47.55% to 16.59%. The rate reached its lowest point in 2019 at 14.04% before entering a period of gradual ascent, ending the analyzed period at 22.44% in 2021.
- Relationship Between NOPBT and Cash Taxes
- Between 2017 and 2019, a divergence occurred where NOPBT increased from 2,263 million to 2,731 million, while cash operating taxes plummeted from 1,076 million to 383 million. This inverse relationship indicates that the decrease in the effective tax rate was not driven by a decline in profitability, but rather by external tax factors or structural changes in tax liabilities.
- Operating Recovery and Tax Normalization
- A dip in NOPBT to 2,221 million occurred in 2020, coinciding with a relatively stable CTR of 15.94%. By 2021, both NOPBT and cash operating taxes rebounded to 2,598 million and 583 million respectively, contributing to the observed increase in the CTR to 22.44%.
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