Allegion PLC (ALLE)
Return on total capital
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 710,100 | 590,100 | 573,900 | 416,300 | 530,900 |
| Long-term debt | US$ in thousands | 1,602,400 | 2,081,900 | 1,429,500 | 1,429,400 | 1,427,600 |
| Total stockholders’ equity | US$ in thousands | 1,318,300 | 941,800 | 759,100 | 829,400 | 757,400 |
| Return on total capital | 24.31% | 19.52% | 26.22% | 18.43% | 24.30% |
December 31, 2023 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $710,100K ÷ ($1,602,400K + $1,318,300K)
= 24.31%
The return on total capital for Allegion plc has shown some fluctuations over the past five years. In 2023, the return on total capital was 21.48%, which represents a slight increase from the previous year's 19.34%. However, it is still lower than the returns recorded in 2020 (24.05%), 2021 (24.38%), and 2019 (25.86%).
While there has been variability in the return on total capital, it is essential to further analyze the reasons behind these fluctuations. A high return on total capital indicates that Allegion plc is efficiently utilizing its total capital to generate profits. It suggests that the company is effectively managing its capital structure and investments to create value for its shareholders.
On the other hand, a declining trend in the return on total capital could raise concerns about the company's operational efficiency and profitability. It may hint at issues such as declining margins, inefficiencies in capital allocation, or challenges in generating sufficient returns on investments.
Overall, monitoring the return on total capital is crucial for assessing Allegion plc's financial performance and effectiveness in utilizing its resources to generate returns for its investors.