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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- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Liquidity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
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Return on Invested Capital (ROIC)
Netflix Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates a fluctuating, but ultimately positive, trend in Return on Invested Capital (ROIC). Net operating profit after taxes (NOPAT) and invested capital both experienced changes over the five-year period, influencing the overall ROIC performance.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT decreased from US$6,078,640 thousand in 2021 to US$4,988,408 thousand in 2022, representing a decline. A subsequent increase was observed in 2023, reaching US$5,437,546 thousand. This upward trajectory continued through 2024 and 2025, with NOPAT reaching US$8,600,341 thousand and US$11,242,756 thousand respectively. The most substantial year-over-year growth in NOPAT occurred between 2024 and 2025.
- Invested Capital
- Invested capital increased from US$34,785,312 thousand in 2021 to US$37,782,560 thousand in 2022. This growth slowed in 2023, with invested capital reaching US$37,926,586 thousand. Further increases were recorded in 2024 and 2025, reaching US$40,712,328 thousand and US$43,678,946 thousand, respectively. The rate of increase in invested capital appears to be accelerating in the later years of the period.
- Return on Invested Capital (ROIC)
- ROIC began at 17.47% in 2021, then decreased to 13.20% in 2022, coinciding with the decline in NOPAT. A modest recovery was seen in 2023, with ROIC reaching 14.34%. A significant increase in ROIC was observed in 2024, rising to 21.12%, and continued into 2025, reaching 25.74%. This substantial improvement in ROIC is attributable to the combined effect of increasing NOPAT and a more moderate increase in invested capital. The trend indicates improving efficiency in capital allocation and profitability.
Overall, the period demonstrates a recovery and strengthening of ROIC, driven primarily by substantial growth in NOPAT in the later years. While invested capital increased consistently, the growth in profitability outpaced the growth in capital employed, resulting in a positive trend in ROIC.
Decomposition of ROIC
Netflix Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2025 | = | × | × | ||||
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The period demonstrates fluctuations in the components contributing to overall return on invested capital. Operating profit margin, turnover of capital, and the impact of the effective cash tax rate all exhibit distinct trends that collectively influence the observed ROIC performance.
- Operating Profit Margin (OPM)
- The operating profit margin experienced a decline from 22.76% in 2021 to 19.10% in 2022. A subsequent recovery is noted, with the margin increasing to 20.30% in 2023, and accelerating to 27.00% in 2024. This upward trajectory continues into 2025, reaching 29.83%. This indicates improving profitability from core operations over the analyzed timeframe.
- Turnover of Capital (TO)
- The turnover of capital remained relatively stable between 2021 and 2023, fluctuating around 0.86-0.89. A noticeable increase begins in 2024, rising to 0.96, and further to 1.04 in 2025. This suggests increasing efficiency in utilizing capital to generate revenue.
- Effective Cash Tax Rate Adjustment (1 – CTR)
- The value of 1 minus the effective cash tax rate decreased from 89.64% in 2021 to 82.48% in 2022, and continued to decline to 79.00% in 2023. A slight recovery to 81.50% is observed in 2024, followed by a further increase to 82.95% in 2025. This indicates a changing tax burden impacting after-tax returns.
- Return on Invested Capital (ROIC)
- Return on invested capital mirrored the combined effects of the aforementioned factors. A decrease from 17.47% in 2021 to 13.20% in 2022 is observed, followed by a modest increase to 14.34% in 2023. Significant improvement is then evident, with ROIC reaching 21.12% in 2024 and 25.74% in 2025. This substantial increase in ROIC is likely driven by the combined positive effects of rising operating profit margins and increasing capital turnover, partially offset by fluctuations in the tax rate adjustment.
The analysis suggests a strengthening financial performance towards the end of the period, characterized by improved profitability and capital efficiency. The interplay between operating margin, capital turnover, and the effective tax rate is crucial in understanding the observed ROIC trends.
Operating Profit Margin (OPM)
Netflix Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
The operating profit margin (OPM) exhibits a fluctuating yet generally positive trend over the observed period. Net operating profit before taxes (NOPBT) also demonstrates an overall increase, contributing to the OPM movement. A detailed examination of these metrics reveals specific patterns and insights.
- Operating Profit Margin (OPM)
- In 2021, the OPM stood at 22.76%. A decline was observed in 2022, with the OPM decreasing to 19.10%. The OPM experienced a modest recovery in 2023, rising to 20.30%. A significant increase is then apparent in 2024, with the OPM reaching 27.00%. This upward trajectory continues into 2025, culminating in an OPM of 29.83%.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT decreased from US$6,781,507 thousand in 2021 to US$6,047,972 thousand in 2022. A subsequent increase to US$6,882,733 thousand was recorded in 2023. Further substantial growth is evident in 2024, with NOPBT reaching US$10,552,660 thousand, and continuing to US$13,554,352 thousand in 2025. This growth in NOPBT directly supports the observed increases in OPM during the later years of the period.
- Adjusted Revenues
- Adjusted revenues consistently increased throughout the period, moving from US$29,789,194 thousand in 2021 to US$45,437,953 thousand in 2025. This consistent revenue growth, coupled with the NOPBT trends, explains the overall improvement in OPM from 2022 to 2025.
The initial decline in OPM in 2022, despite revenue growth, suggests potential increases in operating costs or a shift in revenue mix. However, the subsequent improvements in both NOPBT and OPM indicate successful cost management or pricing strategies implemented from 2023 onwards. The strong performance in 2024 and 2025 suggests a positive trend in operational efficiency and profitability.
Turnover of Capital (TO)
Netflix Inc., TO calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Invested capital. See details »
2 2025 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The turnover of capital demonstrates an increasing trend over the five-year period. While initially exhibiting a slight decline, the metric recovers and shows consistent growth towards the end of the analyzed timeframe.
- Turnover of Capital (TO)
- In 2021, the turnover of capital stood at 0.86. A minor decrease was observed in 2022, with the ratio falling to 0.84. However, 2023 saw a recovery, with the ratio increasing to 0.89. This upward momentum continued into 2024, reaching 0.96, and further accelerated in 2025, culminating in a ratio of 1.04.
The increase in the turnover of capital suggests a growing efficiency in utilizing invested capital to generate revenue. The company is becoming more effective at converting its capital base into sales. The most significant improvement occurred between 2024 and 2025, indicating a potentially substantial shift in operational efficiency or capital allocation strategy during that period.
- Relationship between Adjusted Revenues and Invested Capital
- Adjusted revenues increased consistently throughout the period, from US$29,789,194 thousand in 2021 to US$45,437,953 thousand in 2025. Invested capital also increased, but at a slower rate than revenues, particularly in the later years. This disparity contributes to the observed increase in the turnover of capital ratio.
The sustained growth in the turnover of capital, coupled with increasing revenues, suggests positive developments in the company’s ability to generate sales from its capital base. Continued monitoring of this trend is recommended to assess its sustainability and underlying drivers.
Effective Cash Tax Rate (CTR)
Netflix Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The effective cash tax rate exhibited a generally increasing trend from 2021 to 2023, followed by a slight decline in the subsequent two years. This analysis details the observed patterns in cash operating taxes, net operating profit before taxes, and the resulting effective cash tax rate.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate began at 10.36% in 2021. It increased substantially to 17.52% in 2022, and continued to rise to 21.00% in 2023, representing the highest value within the observed period. A decrease to 18.50% was noted in 2024, and a further reduction to 17.05% occurred in 2025. This suggests a potential stabilization or slight reduction in the proportion of pre-tax profits paid as cash taxes towards the end of the period.
- Cash Operating Taxes
- Cash operating taxes demonstrated a consistent upward trend throughout the five-year period, increasing from US$702,867 thousand in 2021 to US$2,311,596 thousand in 2025. This indicates a growing absolute tax expense.
- Net Operating Profit Before Taxes (NOPBT)
- Net operating profit before taxes experienced fluctuations. It decreased from US$6,781,507 thousand in 2021 to US$6,047,972 thousand in 2022, then increased to US$6,882,733 thousand in 2023. A significant rise was observed in 2024, reaching US$10,552,660 thousand, and continued to grow to US$13,554,352 thousand in 2025. The increasing NOPBT, coupled with rising cash taxes, contributes to the observed CTR trends.
The initial increase in the effective cash tax rate likely reflects a combination of increased profitability and changes in the applicable tax laws or the company’s tax position. The subsequent decrease in the CTR, despite continued growth in both NOPBT and cash taxes, suggests that the company may be benefiting from tax planning strategies or changes in the mix of taxable income sources.