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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- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Aggregate Accruals
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Return on Invested Capital (ROIC)
Trane Technologies plc, 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 thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| 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: 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 showed a fluctuating trend over the analyzed period. Starting at approximately 1.45 billion US dollars in 2018, it increased to about 1.64 billion in 2019. In 2020, a noticeable decline occurred, bringing the figure down to roughly 1.27 billion. However, the profit recovered strongly in the subsequent years, reaching around 1.67 billion in 2021 and further rising to approximately 2.14 billion in 2022. Overall, the data indicates growth in net operating profit after taxes from 2018 to 2022, with a dip observed during 2020.
- Invested Capital
- Invested capital experienced an initial increase from approximately 13.7 billion US dollars in 2018 to about 15.6 billion in 2019. Following this peak, the invested capital decreased over the next two years to around 13.8 billion in 2020 and approximately 13.4 billion in 2021. In 2022, it showed a slight increase to about 13.5 billion. The pattern suggests a moderate rise followed by a reduction and stabilization in invested capital during the period.
- Return on Invested Capital (ROIC)
- The return on invested capital displayed some variability, initially declining slightly from 10.61% in 2018 to 10.49% in 2019, and then dropping more significantly to 9.15% in 2020. Subsequent years showed a positive trend, with ROIC increasing to 12.53% in 2021 and reaching a notably higher level of 15.82% in 2022. This indicates an improvement in the efficiency and profitability of invested capital, particularly in the latter part of the timeframe.
- Summary of Financial Trends
- Overall, the period analyzed reveals resilience and recovery in profitability metrics after 2020. Despite fluctuations in invested capital, the substantial increase in ROIC in 2021 and 2022 suggests enhanced operational performance and capital utilization. The rebound in net operating profit after taxes further supports the indication of improved financial health and efficiency towards the end of the period.
Decomposition of ROIC
Trane Technologies plc, 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 »
The financial data presents several key performance indicators over a five-year period. The trends observed in these metrics provide insight into the company's operational efficiency, capital utilization, tax management, and overall profitability.
- Operating Profit Margin (OPM)
- The operating profit margin shows a generally positive trend, increasing from 12.3% in 2018 to 15.6% in 2022. After a slight dip in 2019 to 12.24%, the margin improved steadily, with a notable increase between 2020 and 2021 from 12.8% to 14.73% and continued growth in 2022. This suggests an enhancement in operational efficiency or pricing power over the period.
- Turnover of Capital (TO)
- The turnover of capital ratio experienced some fluctuations. Starting at 1.14 in 2018, it decreased to 0.9 in 2020, indicating less efficient use of capital during this period. However, it recovered to 1.06 in 2021 and further improved to 1.18 in 2022. This rebound suggests better asset utilization in recent years.
- 1 – Effective Cash Tax Rate (CTR)
- The metric, representing one minus the effective cash tax rate, increased from 75.34% in 2018 to 85.73% in 2022. The higher value indicates a decrease in the effective cash tax rate over time. This change may reflect improved tax planning, tax benefits, or changes in the company's geographic tax footprint.
- Return on Invested Capital (ROIC)
- Return on invested capital displays a variable trend with an initial value of 10.61% in 2018, declining to 9.15% in 2020. Subsequently, the ROIC increased sharply to 12.53% in 2021 and further to 15.82% in 2022. The increase in ROIC aligns with improvements in both operating profit margin and turnover of capital, indicating enhanced overall capital efficiency and profitability.
Overall, the data indicates improving profitability and capital efficiency from 2020 onward, with particularly strong performance in operating profit margin and return on invested capital in the final two years. The increase in one minus the effective cash tax rate further supports the notion of improved after-tax profitability. The trends suggest a positive trajectory in financial performance, driven by enhanced operational effectiveness and capital management.
Operating Profit Margin (OPM)
Trane Technologies plc, 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 thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| 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: 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 revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- From 2018 to 2022, the net operating profit before taxes exhibited a fluctuating yet overall growing trend. It increased from approximately 1.93 billion in 2018 to over 2.49 billion in 2022. There was a notable decline in 2020, dropping to about 1.59 billion, likely reflecting external challenges during that period. However, a strong recovery occurred in the subsequent years, with significant growth from 2020 to 2022.
- Adjusted Net Revenues
- Adjusted net revenues showed a similar pattern of fluctuation with a peak in 2019 of roughly 16.61 billion. There was a sharp decline in 2020 to approximately 12.46 billion, reflecting a downturn in sales or operations. Revenues rebounded in 2021 and 2022, reaching nearly 16 billion by the end of 2022, indicating a recovery trend but not yet exceeding the 2019 peak.
- Operating Profit Margin (OPM)
- The operating profit margin improved consistently over the five years. Starting at 12.3% in 2018, it remained relatively stable through 2019 and 2020, with a slight increase in 2020. Post-2020, a marked improvement was observed, with margins increasing to 14.73% in 2021 and further to 15.6% in 2022, suggesting enhanced operational efficiency and profitability.
- Overall Analysis
- The data reveal a period of disruption around 2020, likely influenced by external economic or market factors resulting in decreased revenue and profit. However, the subsequent years demonstrate a robust recovery with increases in both profitability and adjusted net revenues. The steady rise in operating profit margin points to effective management of costs and improved operational performance. This combination of recovering revenue and increasing margins suggests strengthening financial health and resilience over the analyzed period.
Turnover of Capital (TO)
Trane Technologies plc, 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 thousands) | ||||||
| Net revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| 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: 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 revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Net Revenues
- Adjusted net revenues demonstrate a fluctuation over the five-year period. Starting at approximately 15.7 billion USD in 2018, revenues increased to around 16.6 billion USD in 2019. This was followed by a significant decline to about 12.5 billion USD in 2020, likely reflecting an external disruption. Subsequently, revenues recovered to nearly 14.1 billion USD in 2021 and further improved to approximately 16.0 billion USD in 2022, approaching pre-decline levels.
- Invested Capital
- Invested capital shows a general upward trend initially, rising from about 13.7 billion USD in 2018 to 15.6 billion USD in 2019. It then decreased to 13.8 billion USD in 2020 and continued a marginal decline to 13.4 billion USD in 2021, stabilizing at roughly 13.5 billion USD in 2022. These movements suggest a period of capital adjustments possibly linked to operational or strategic responses to the revenue fluctuations.
- Turnover of Capital (TO)
- The turnover of capital ratio indicates efficiency in utilizing invested capital to generate revenues. It began at 1.14 in 2018, decreased to 1.06 in 2019, and further fell to a low of 0.9 in 2020, correlating with the revenue drop and indicating reduced capital efficiency during that year. The ratio rebounded to 1.06 in 2021 and improved further to 1.18 in 2022, surpassing the initial 2018 level, reflecting enhanced capital productivity in the latest period.
- Overall Trends and Insights
- The data reveals a notable disruption in 2020, characterized by decreased revenues and capital turnover, alongside a reduction in invested capital. Recovery is evident in subsequent years, with a return to growth in adjusted net revenues and improvements in capital efficiency by 2022. The invested capital stabilization after 2020 suggests a cautious or optimized approach to capital deployment. The recovery pattern indicates resilience and improved capital utilization in response to prior challenges.
Effective Cash Tax Rate (CTR)
Trane Technologies plc, 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 thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| 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: 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
- Cash operating taxes displayed a declining trend from 2018 to 2020, decreasing from 475,262 thousand US dollars to 328,760 thousand US dollars. In 2021, there was a notable increase to 409,078 thousand US dollars, followed by a decrease again in 2022 to 356,060 thousand US dollars. This pattern suggests some volatility in cash tax payments over the five-year period, with a general reduction from the initial 2018 levels.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes showed overall growth but with some fluctuations. Starting at 1,927,166 thousand US dollars in 2018, it increased to 2,032,890 thousand US dollars in 2019. There was a significant decrease in 2020 to 1,594,405 thousand US dollars, potentially reflecting an adverse impact likely attributable to external factors in that year. Subsequently, the figure recovered strongly, reaching 2,082,796 thousand US dollars in 2021 and further rising to 2,494,979 thousand US dollars in 2022, indicating a strong operational performance in the most recent years.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate showed a steady decline over the period analyzed. Beginning at 24.66% in 2018, it dropped to 19.28% in 2019, remained relatively stable around 19-20% in 2020 and 2021, and then declined sharply to 14.27% in 2022. This consistent reduction in the tax rate implies improved tax efficiency or changes in tax planning strategies over time.