Deluxe Corporation (DLX)
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 | 165,335 | 178,697 | 149,218 | 49,852 | -181,058 |
| Long-term debt | US$ in thousands | 1,506,700 | 1,572,530 | 1,625,750 | 840,000 | 883,500 |
| Total stockholders’ equity | US$ in thousands | 604,094 | 603,809 | 574,318 | 540,697 | 570,861 |
| Return on total capital | 7.83% | 8.21% | 6.78% | 3.61% | -12.45% |
December 31, 2023 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $165,335K ÷ ($1,506,700K + $604,094K)
= 7.83%
Deluxe Corp.'s return on total capital has shown a declining trend over the five-year period from 2019 to 2023. In 2019, the return on total capital was the highest at 20.91%, indicating efficient utilization of capital to generate profits. However, there has been a gradual decrease in subsequent years, with the return on total capital dropping to 15.81% in 2020, 8.72% in 2021, and further to 9.46% in 2022, before finally settling at 9.40% in 2023.
This downward trajectory suggests that Deluxe Corp. may be facing challenges in generating returns relative to the capital invested in the business. It is vital for the company to assess its capital allocation strategies, operational efficiency, and overall business performance to enhance its return on total capital in the future. Monitoring and improving this metric are crucial for shareholders and investors as it reflects the company's ability to generate profits from its total capital base.