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)
Zoetis Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,410) | 1,958) | 2,131) | 1,727) | 1,570) | |
| Invested capital2 | 11,550) | 12,542) | 11,612) | 11,557) | 9,838) | |
| Performance Ratio | ||||||
| ROIC3 | 20.87% | 15.61% | 18.36% | 14.94% | 15.96% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| AbbVie Inc. | 4.83% | 14.05% | 12.89% | — | — | |
| Amgen Inc. | 11.15% | 16.11% | 15.93% | — | — | |
| Bristol-Myers Squibb Co. | 8.69% | 6.37% | 8.29% | — | — | |
| Danaher Corp. | 3.94% | 8.76% | 9.01% | — | — | |
| Eli Lilly & Co. | 10.99% | 17.98% | 19.39% | — | — | |
| Gilead Sciences Inc. | 11.10% | 8.09% | 14.43% | — | — | |
| Johnson & Johnson | 8.98% | 14.16% | 19.23% | — | — | |
| Merck & Co. Inc. | -1.02% | 19.14% | 18.87% | — | — | |
| Pfizer Inc. | -0.82% | 28.01% | 20.98% | — | — | |
| Regeneron Pharmaceuticals Inc. | 23.53% | 28.87% | 72.50% | — | — | |
| Thermo Fisher Scientific Inc. | 5.98% | 7.76% | 9.42% | — | — | |
| Vertex Pharmaceuticals Inc. | 19.93% | 22.66% | 23.86% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,410 ÷ 11,550 = 20.87%
4 Click competitor name to see calculations.
The entity's financial performance from 2019 to 2023 is characterized by an overall expansion in operating profitability and a significant improvement in capital efficiency by the end of the period. Despite a period of volatility between 2020 and 2022, the return on invested capital reached a five-year high in 2023.
- Net Operating Profit After Taxes (NOPAT)
- A general upward trend is observed, with NOPAT rising from 1,570 million in 2019 to 2,410 million in 2023. A temporary contraction occurred in 2022, where figures fell to 1,958 million from the previous year's 2,131 million, before rebounding strongly in the final year of the analysis.
- Invested Capital
- Invested capital grew steadily from 9,838 million in 2019 to a peak of 12,542 million in 2022. However, 2023 saw a notable reduction in the capital base to 11,550 million, suggesting a shift toward capital optimization or asset divestment.
- Return on Invested Capital (ROIC)
- The ROIC exhibited fluctuations, decreasing to 14.94% in 2020 as capital growth outpaced profit growth, and recovering to 18.36% in 2021. The most significant expansion occurred in 2023, with ROIC climbing to 20.87%. This peak resulted from the simultaneous effect of increased NOPAT and a reduced invested capital base, indicating a marked increase in operational efficiency.
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Decomposition of ROIC
Zoetis Inc., decomposition of ROIC
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The analysis of the return on invested capital (ROIC) over the five-year period from 2019 to 2023 reveals an overall positive trajectory, culminating in a peak of 20.87% in the final year. This growth is primarily driven by consistent improvements in operational profitability and a significant recovery in capital efficiency toward the end of the period.
- Operating Profit Margin (OPM)
- A sustained upward trend is observed in the operating profit margin, which increased steadily from 31.81% in 2019 to 36.25% in 2023. This continuous expansion indicates a progressive improvement in operational efficiency and cost management, serving as a primary driver for the growth in overall returns.
- Turnover of Capital (TO)
- Capital turnover exhibited periodic volatility, experiencing a decline to 0.58 in 2020 before recovering to 0.67 in 2021. After a slight dip to 0.64 in 2022, the ratio reached a period high of 0.74 in 2023. This suggests an improved capacity to generate revenue from the invested capital base by the end of the analyzed timeframe.
- Effective Cash Tax Rate Impact (1 – CTR)
- The post-tax multiplier remained relatively stable, fluctuating between 77.82% and 78.83% for most of the period. However, a notable contraction occurred in 2022, where the value dropped to 69.30%. This decrease in the after-tax retention of profits exerted downward pressure on the ROIC during that specific fiscal year.
- ROIC Synthesis
- The fluctuations in the return on invested capital are a result of the combined effects of profitability, asset efficiency, and tax impacts. The dip in ROIC in 2020 was primarily linked to a decrease in capital turnover, while the decline in 2022 was compounded by both a reduction in turnover and a significantly lower post-tax multiplier. The peak ROIC achieved in 2023 was the result of a synergistic effect between the highest recorded operating profit margin and the highest capital turnover ratio in the five-year sequence.
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Operating Profit Margin (OPM)
Zoetis Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,410) | 1,958) | 2,131) | 1,727) | 1,570) | |
| Add: Cash operating taxes2 | 687) | 867) | 581) | 469) | 422) | |
| Net operating profit before taxes (NOPBT) | 3,097) | 2,825) | 2,712) | 2,196) | 1,991) | |
| Revenue | 8,544) | 8,080) | 7,776) | 6,675) | 6,260) | |
| Profitability Ratio | ||||||
| OPM3 | 36.25% | 34.97% | 34.88% | 32.90% | 31.81% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| AbbVie Inc. | 14.58% | 26.77% | 27.06% | — | — | |
| Amgen Inc. | 40.00% | 35.35% | 32.55% | — | — | |
| Bristol-Myers Squibb Co. | 21.81% | 19.38% | 20.31% | — | — | |
| Danaher Corp. | 21.44% | 27.12% | 27.65% | — | — | |
| Eli Lilly & Co. | 20.50% | 25.19% | 23.01% | — | — | |
| Gilead Sciences Inc. | 27.67% | 24.71% | 34.43% | — | — | |
| Johnson & Johnson | 17.15% | 22.67% | 24.39% | — | — | |
| Merck & Co. Inc. | 4.63% | 30.22% | 30.60% | — | — | |
| Pfizer Inc. | 1.40% | 38.53% | 29.86% | — | — | |
| Regeneron Pharmaceuticals Inc. | 29.03% | 39.28% | 57.80% | — | — | |
| Thermo Fisher Scientific Inc. | 15.91% | 18.33% | 23.92% | — | — | |
| Vertex Pharmaceuticals Inc. | 38.69% | 46.55% | 36.91% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Revenue
= 100 × 3,097 ÷ 8,544 = 36.25%
4 Click competitor name to see calculations.
Between 2019 and 2023, a consistent upward trajectory is observed across revenue, net operating profit before taxes (NOPBT), and the operating profit margin (OPM). This concurrent growth indicates an expansion in scale coupled with an improvement in operational efficiency.
- Revenue Performance
- Revenue grew steadily from US$ 6,260 million in 2019 to US$ 8,544 million in 2023. A notable acceleration occurred between 2020 and 2021, during which revenue increased by approximately 16.5%.
- Net Operating Profit before Taxes (NOPBT) Trends
- NOPBT demonstrated significant growth, rising from US$ 1,991 million in 2019 to US$ 3,097 million in 2023. The total increase in NOPBT over the five-year period exceeded the growth rate of revenue, signaling positive operating leverage.
- Operating Profit Margin (OPM) Analysis
- The OPM expanded every year, starting at 31.81% in 2019 and reaching 36.25% by 2023. This 444-basis point improvement reflects a sustained ability to convert a higher percentage of revenue into operating profit, suggesting effective cost management and pricing power.
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Turnover of Capital (TO)
Zoetis Inc., TO calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenue | 8,544) | 8,080) | 7,776) | 6,675) | 6,260) | |
| Invested capital1 | 11,550) | 12,542) | 11,612) | 11,557) | 9,838) | |
| Efficiency Ratio | ||||||
| TO2 | 0.74 | 0.64 | 0.67 | 0.58 | 0.64 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| AbbVie Inc. | 0.80 | 0.71 | 0.59 | — | — | |
| Amgen Inc. | 0.38 | 0.62 | 0.60 | — | — | |
| Bristol-Myers Squibb Co. | 0.67 | 0.64 | 0.58 | — | — | |
| Danaher Corp. | 0.30 | 0.40 | 0.40 | — | — | |
| Eli Lilly & Co. | 1.16 | 1.18 | 1.08 | — | — | |
| Gilead Sciences Inc. | 0.59 | 0.59 | 0.57 | — | — | |
| Johnson & Johnson | 0.86 | 0.83 | 0.96 | — | — | |
| Merck & Co. Inc. | 0.86 | 0.80 | 0.69 | — | — | |
| Pfizer Inc. | 0.38 | 0.91 | 0.94 | — | — | |
| Regeneron Pharmaceuticals Inc. | 1.10 | 0.99 | 1.48 | — | — | |
| Thermo Fisher Scientific Inc. | 0.50 | 0.54 | 0.49 | — | — | |
| Vertex Pharmaceuticals Inc. | 0.75 | 0.68 | 0.81 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 Invested capital. See details »
2 2023 Calculation
TO = Revenue ÷ Invested capital
= 8,544 ÷ 11,550 = 0.74
3 Click competitor name to see calculations.
The analysis of capital utilization from 2019 to 2023 reveals a trajectory of increasing operational efficiency, characterized by consistent revenue growth and a strategic optimization of the invested capital base toward the end of the period.
- Revenue Performance
- Revenue demonstrated a consistent upward trend throughout the five-year period, increasing from US$ 6,260 million in 2019 to US$ 8,544 million in 2023. The most pronounced growth occurred between 2020 and 2021, indicating a strong expansion in top-line performance.
- Invested Capital Trends
- Invested capital showed a general increase from 2019 to 2022, rising from US$ 9,838 million to a peak of US$ 12,542 million. This expansion was followed by a notable reduction in 2023, where invested capital decreased to US$ 11,550 million, suggesting a contraction or optimization of the asset base.
- Turnover of Capital (TO) Analysis
- The turnover of capital ratio experienced volatility, starting at 0.64 in 2019 and dipping to 0.58 in 2020, as the growth in invested capital outpaced revenue gains. However, a recovery trend followed, culminating in a five-year high of 0.74 in 2023. This peak efficiency is attributed to the combined effect of reaching record revenue levels while simultaneously reducing the total invested capital.
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Effective Cash Tax Rate (CTR)
Zoetis Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,410) | 1,958) | 2,131) | 1,727) | 1,570) | |
| Add: Cash operating taxes2 | 687) | 867) | 581) | 469) | 422) | |
| Net operating profit before taxes (NOPBT) | 3,097) | 2,825) | 2,712) | 2,196) | 1,991) | |
| Tax Rate | ||||||
| CTR3 | 22.18% | 30.70% | 21.42% | 21.37% | 21.17% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| AbbVie Inc. | 58.42% | 25.72% | 18.70% | — | — | |
| Amgen Inc. | 27.52% | 27.01% | 18.93% | — | — | |
| Bristol-Myers Squibb Co. | 40.21% | 48.91% | 29.34% | — | — | |
| Danaher Corp. | 39.60% | 19.69% | 18.58% | — | — | |
| Eli Lilly & Co. | 53.85% | 39.25% | 22.28% | — | — | |
| Gilead Sciences Inc. | 31.75% | 44.70% | 25.84% | — | — | |
| Johnson & Johnson | 39.03% | 25.14% | 17.53% | — | — | |
| Merck & Co. Inc. | 125.66% | 20.99% | 10.42% | — | — | |
| Pfizer Inc. | 252.75% | 20.44% | 25.02% | — | — | |
| Regeneron Pharmaceuticals Inc. | 26.07% | 26.00% | 15.19% | — | — | |
| Thermo Fisher Scientific Inc. | 24.94% | 21.94% | 19.89% | — | — | |
| Vertex Pharmaceuticals Inc. | 30.87% | 28.16% | 19.91% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 687 ÷ 3,097 = 22.18%
4 Click competitor name to see calculations.
The financial data from 2019 to 2023 indicates a consistent growth trajectory in operational profitability, contrasted by a period of volatility in the cash tax burden during the latter part of the period.
- Net Operating Profit Before Taxes (NOPBT)
- A sustained upward trend is observed in NOPBT, which grew steadily from 1,991 million US$ in 2019 to 3,097 million US$ in 2023. This continuous increase suggests a robust expansion in core operational earning capacity over the five-year duration.
- Cash Operating Taxes
- Cash tax payments increased incrementally from 2019 through 2021, followed by a significant surge to 867 million US$ in 2022. This peak was followed by a contraction in 2023, where cash operating taxes fell to 687 million US$, despite the continued increase in NOPBT.
- Effective Cash Tax Rate (CTR)
- The CTR remained remarkably stable between 21.17% and 21.42% from 2019 to 2021. A sharp deviation occurred in 2022, with the rate spiking to 30.70%, representing a notable increase in the cash tax burden relative to operating profit. In 2023, the rate reverted toward its historical baseline, settling at 22.18%.
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