Apple Inc. (AAPL) Return on Invested Capital (ROIC)

Apple Inc.

AAPL (NASDAQ)

(%)

Models
Apple Inc. Return on Invested Capital (ROIC)

# Render description block
model.render_description({
    "data": r"""
### Return on Invested Capital (ROIC)

The return on capital or invested capital in a business attempts to measure the return earned on capital invested in an investment.

> Read more on [Aswath Damodaran - Return Measures PDF](https://pages.stern.nyu.edu/~adamodar/pdfiles/papers/returnmeasures.pdf)

### ROIC Formula

`Return on Invested Capital (ROIC)` = `Net Operating Profit After Tax (NOPAT)` / `Invested Capital`

The Net Operating Profit After Tax (NOPAT) is calculated using the reported Earnings Before Interest and Taxes (EBIT) or Operating Income on the income statement adjusted for the tax liability.

`Net Operating Profit After Tax (NOPAT)` = `Operating Income` * (1 - `Income Tax Rate`)

There are two ways to calculate invested capital: One looks at the company's assets, and another looks at its financing from debt and equity. In this model, we are using the financing based approach.

`Invested Capital` = `Total Stockholders Equity` + `Total Debt` - `Cash and Short Term Investments`

We then adjust `Invested Capital` and `Net Operating Profit After Tax (NOPAT)`  for **capitalized R&D expenses**.
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Historical Data
data.compute({
    "user:%incomeTaxRate": """
        income:incomeTaxExpense / income:incomeBeforeTax
    """,
    "user:netOperatingProfitAfterTaxNopat": """
        income:operatingIncome * (1 - user:%incomeTaxRate)
    """,
    "user:investedCapital": """
        balance:totalStockholdersEquity
        + balance:totalDebt
        - balance:cashAndShortTermInvestments
    """,
    "user:%returnOnInvestedCapitalRoic": """
        user:netOperatingProfitAfterTaxNopat / user:investedCapital
    """,
}, forecast=0, timeseries="annual")

model.render_table({
    "timeseries": "annual",
    "data": {
        "user:%incomeTaxRate": "Income Tax Rate",
        "income:operatingIncome": "Operating Income",
        "user:netOperatingProfitAfterTaxNopat": "Net Operating Profit After Tax (NOPAT)",
        "balance:totalStockholdersEquity": "Total Stockholders Equity",
        "balance:totalDebt": "+ Total Debt",
        "balance:cashAndShortTermInvestments": "- Cash and Short Term Investments",
        "user:investedCapital": "= Invested Capital",
        "user:%returnOnInvestedCapitalRoic": "Return on Invested Capital (ROIC)",
    },
    "start": -5,
    "end": 0,
    "properties": {
        "title": "Historical Data",
        "order": "descending",
        "number_format": "M",
        "include_ltm": True,
        "display_averages": False,
        "width": "responsive"
    }
})

# --- R&D Amortization
assumptions.set({
    "timeseries": "annual",
    "data": {
        "#rDAmortizationYears": """
            5
        """,
    },
    "titles": {
        "#rDAmortizationYears": "R&D Amortization Years",
    },
    "properties": {
        "width": "responsive",
        "title": "R&D Amortization",
        "id": "component-10",
        "bindTo": None
    },
    "descriptions": {
        "#rDAmortizationYears": r"""
Represents the assumed useful life (in years) over which R&D spending is capitalized and amortized to form a **“research asset.”**

A longer period increases the capitalized R&D asset (raising invested capital) and typically lowers adjusted ROIC; a shorter period does the opposite.
        """,
    }
})

# --- R&D Amortization Calculations
data.compute({
    "user:#unamortizedRDRatio": """
        (0 > time:index >= -assumption:#rDAmortizationYears) 
        * (assumption:#rDAmortizationYears + time:index + 1) / assumption:#rDAmortizationYears
    """,
    "user:unamortizedRDValue": """
        income:researchAndDevelopmentExpenses * user:#unamortizedRDRatio
    """,
    "user:#rDAmortizationRatio": """
        (0 > 1 + time:index >= - assumption:#rDAmortizationYears) * 1 / assumption:#rDAmortizationYears
    """,
    "user:rDAmortizationThisYear": """
        income:researchAndDevelopmentExpenses * user:#rDAmortizationRatio
    """,
}, forecast=0, timeseries="annual")

model.render_table({
    "timeseries": "annual",
    "data": {
        "income:researchAndDevelopmentExpenses": "Research and Development Expenses",
        "user:#unamortizedRDRatio": "Unamortized R&D Ratio",
        "user:unamortizedRDValue": "Unamortized R&D Value",
        "user:#rDAmortizationRatio": "R&D Amortization Ratio",
        "user:rDAmortizationThisYear": "R&D Amortization This Year",
    },
    "start": data.get("""
        -assumption:#rDAmortizationYears - 1
    """),
    "end": 0,
    "properties": {
        "title": "R&D Amortization Calculations",
        "order": "descending",
        "number_format": "M",
        "include_ltm": False,
        "display_averages": False,
        "width": "responsive"
    }
})

# Render description block
model.render_description({
    "data": r"""
### Capitalizing R&D Expenses

As per prof. Aswath Damodaran's paper:
> "Research expenses, notwithstanding the uncertainty about future benefits, should be capitalized."

Capitalizing R&D expenses treats R&D as an intangible investment. We estimate a “research asset” as the sum of unamortized R&D based on the selected amortization period.

`Value of the Research Asset` = Sum of `Unamortized R&D Value`

We also record annual amortization of that asset.

`Amortization of Research Asset` = Sum of `R&D Amortization This Year`

We then adjust profitability and capital to reflect this treatment:

`ROIC Adjusted for Capitalized R&D` = `Adjusted NOPAT` / `Adjusted Invested Capital`
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Adjusted ROIC Calculation
data.compute_results({
    "amortizationOfResearchAsset": """
         function:sum(start=-assumption:#rDAmortizationYears - 1, end=-1):user:rDAmortizationThisYear
    """,
    "adjustedNopat": """
        user:netOperatingProfitAfterTaxNopat
        + income:researchAndDevelopmentExpenses
        - result:amortizationOfResearchAsset
    """,
    "valueOfTheResearchAsset": """
         function:sum(start=-assumption:#rDAmortizationYears - 1, end=-1):user:unamortizedRDValue 
    """,
    "adjustedStockholdersEquity": """
        balance:totalStockholdersEquity + result:valueOfTheResearchAsset
    """,
    "adjustedInvestedCapital": """
        result:adjustedStockholdersEquity
        + balance:totalDebt
        - balance:cashAndShortTermInvestments
    """,
    "%roicAdjustedForCapitalizedRD": """
        result:adjustedNopat / result:adjustedInvestedCapital
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "user:netOperatingProfitAfterTaxNopat": {
            "label": "Net Operating Profit After Tax (NOPAT)",
            "type": "$"
        },
        "income:researchAndDevelopmentExpenses": {
            "label": "+ Research and Development Expenses",
            "type": "$"
        },
        "result:amortizationOfResearchAsset": {
            "label": "- Amortization of Research Asset",
            "type": "$"
        },
        "result:adjustedNopat": {
            "label": "= Adjusted NOPAT",
            "type": "$"
        },
        "balance:totalStockholdersEquity": {
            "label": "Total Stockholders Equity",
            "type": "$"
        },
        "result:valueOfTheResearchAsset": {
            "label": "+ Value of the Research Asset",
            "type": "$"
        },
        "result:adjustedStockholdersEquity": {
            "label": "= Adjusted Stockholders Equity",
            "type": "$"
        },
        "balance:totalDebt": {
            "label": "+ Total Debt",
            "type": "$"
        },
        "balance:cashAndShortTermInvestments": {
            "label": "- Cash and Short Term Investments",
            "type": "$"
        },
        "result:adjustedInvestedCapital": {
            "label": "= Adjusted Invested Capital",
            "type": "$"
        },
        "result:%roicAdjustedForCapitalizedRD": {
            "label": "ROIC Adjusted for Capitalized R&D",
            "type": "%"
        },
    },
    "properties": {
        "title": "Adjusted ROIC Calculation",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- Return on Invested Capital
model.set_final_value({
    "value": data.get("""
        user:%returnOnInvestedCapitalRoic
    """, timeseries="annual"),
    "units": "%",
    "title": "Return on Invested Capital",
    "properties": {
        "width": "full" 
    }
})

Return on Invested Capital

%

* Values are not guaranteed, please do your own
research before making investment decisions.

Return on Invested Capital (ROIC)

The return on capital or invested capital in a business attempts to measure the return earned on capital invested in an investment.

Read more on Aswath Damodaran - Return Measures PDF

ROIC Formula

Return on Invested Capital (ROIC) = Net Operating Profit After Tax (NOPAT) / Invested Capital

The Net Operating Profit After Tax (NOPAT) is calculated using the reported Earnings Before Interest and Taxes (EBIT) or Operating Income on the income statement adjusted for the tax liability.

Net Operating Profit After Tax (NOPAT) = Operating Income * (1 - Income Tax Rate)

There are two ways to calculate invested capital: One looks at the company's assets, and another looks at its financing from debt and equity. In this model, we are using the financing based approach.

Invested Capital = Total Stockholders Equity + Total Debt - Cash and Short Term Investments

We then adjust Invested Capital and Net Operating Profit After Tax (NOPAT) for capitalized R&D expenses.

Historical Data

Monetary values in USD amounts except #	LTM Mar 07	2025 Sep 27	2024 Sep 28	2023 Sep 30	2022 Sep 24	2021 Sep 25
Income Tax Rate	16.56%	15.61%	24.09%	14.72%	16.2%	13.3%
Operating Income	141,070	133,050	123,216	114,301	119,437	108,949
Net Operating Profit After Tax (NOPAT)	117,713	112,281	93,532	97,477	100,083	94,456
Total Stockholders Equity	88,190	73,733	56,950	62,146	50,672	63,090
+ Total Debt	90,509	112,377	119,059	123,930	132,480	136,522
- Cash and Short Term Investments	66,907	54,697	65,171	61,555	48,304	62,639
= Invested Capital	111,792	131,413	110,838	124,521	134,848	136,973
Return on Invested Capital (ROIC)	105.3%	85.44%	84.39%	78.28%	74.22%	68.96%

R&D Amortization

R&D Amortization Calculations

Monetary values in USD amounts except #	2025 Sep 27	2024 Sep 28	2023 Sep 30	2022 Sep 24	2021 Sep 25	2020 Sep 26
Research and Development Expenses	34,550	31,370	29,915	26,251	21,914	18,752
Unamortized R&D Ratio	1.0	0.8	0.6	0.4	0.2	0.0
Unamortized R&D Value	34,550	25,096	17,949	10,500	4,383	0
R&D Amortization Ratio	0.0	0.2	0.2	0.2	0.2	0.2
R&D Amortization This Year	0	6,274	5,983	5,250	4,383	3,750

Capitalizing R&D Expenses

As per prof. Aswath Damodaran's paper:

"Research expenses, notwithstanding the uncertainty about future benefits, should be capitalized."

Capitalizing R&D expenses treats R&D as an intangible investment. We estimate a “research asset” as the sum of unamortized R&D based on the selected amortization period.

Value of the Research Asset = Sum of Unamortized R&D Value

We also record annual amortization of that asset.

Amortization of Research Asset = Sum of R&D Amortization This Year

We then adjust profitability and capital to reflect this treatment:

ROIC Adjusted for Capitalized R&D = Adjusted NOPAT / Adjusted Invested Capital

Adjusted ROIC Calculation
Net Operating Profit After Tax (NOPAT)	117.7 Bil. USD
+ Research and Development Expenses	37.17 Bil. USD
- Amortization of Research Asset	25.64 Bil. USD
= Adjusted NOPAT	129.2 Bil. USD
Total Stockholders Equity	88.19 Bil. USD
+ Value of the Research Asset	92.48 Bil. USD
= Adjusted Stockholders Equity	180.7 Bil. USD
+ Total Debt	90.51 Bil. USD
- Cash and Short Term Investments	66.91 Bil. USD
= Adjusted Invested Capital	204.3 Bil. USD
ROIC Adjusted for Capitalized R&D	63.27%

Return on Invested Capital