Advance Auto Parts Inc (AAP)
Return on total capital
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -687,065 | 119,902 | 655,422 | 843,716 | 697,901 |
| Long-term debt | US$ in thousands | — | — | — | — | — |
| Total stockholders’ equity | US$ in thousands | 2,169,940 | 2,519,730 | 2,599,190 | 3,128,290 | 3,559,510 |
| Return on total capital | -31.66% | 4.76% | 25.22% | 26.97% | 19.61% |
December 31, 2024 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $-687,065K ÷ ($—K + $2,169,940K)
= -31.66%
The return on total capital for Advance Auto Parts Inc has shown fluctuations over the past five years. In 2020, the return on total capital was 19.61%, showing a positive performance. This ratio improved in 2021, reaching 26.97%, indicating increased efficiency in generating profits from the total capital employed. However, in 2022, there was a slight decrease to 25.22%, though still at a relatively healthy level.
The trend reversed significantly in 2023, with the return on total capital dropping to 4.76%, suggesting a decline in the company's ability to generate returns compared to its total capital base. Furthermore, in 2024, the return on total capital turned negative, at -31.66%, indicating that the company is experiencing challenges in utilizing its total capital effectively to generate profits.
The data highlights the importance of monitoring and managing the efficient allocation of capital to generate sustainable returns for Advance Auto Parts Inc. The declining trend in the return on total capital in recent years may necessitate a closer review of the company's operational performance and capital allocation strategies to improve overall financial health and profitability.
Peer comparison
Dec 31, 2024