Archrock Inc (AROC)

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 237,452 253,735 161,848 147,096 19,734
Long-term debt US$ in thousands 2,198,380 1,584,870 1,548,330 1,530,820 1,688,870
Total stockholders’ equity US$ in thousands 1,323,530 871,021 860,693 891,438 935,557
Return on total capital 6.74% 10.33% 6.72% 6.07% 0.75%

December 31, 2024 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $237,452K ÷ ($2,198,380K + $1,323,530K)
= 6.74%

The return on total capital for Archrock Inc has shown significant improvement over the past few years. The ratio was 0.75% as of December 31, 2020, indicating relatively low returns on the company's total capital investments. However, there has been a notable upward trend in subsequent years, with the ratio increasing to 6.07% as of December 31, 2021, and further to 6.72% as of December 31, 2022.

The most significant jump in the return on total capital occurred as of December 31, 2023, reaching 10.33%, reflecting a substantial increase in the company's ability to generate returns on the total capital invested. This suggests that Archrock Inc has been able to enhance its operational efficiency and profitability, potentially through better capital allocation or improved business performance.

Although there was a slight dip in the ratio to 6.74% as of December 31, 2024, overall, the trend indicates a positive trajectory in the company's ability to generate returns on its total capital. This improvement in the return on total capital demonstrates the company's effective management of its capital resources and suggests a growing potential for sustainable profitability and value creation for its shareholders.