Heritage Financial Corporation (HFWA)
Return on total capital
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 132,225 | 136,060 | 123,885 | 114,012 | 107,508 | 102,704 | 102,486 | 120,139 | 127,549 | 132,083 | 126,828 | 81,536 | 66,503 | 61,369 | 65,528 | 92,788 | 99,213 | 98,708 | 94,681 | 87,603 |
| Long-term debt | US$ in thousands | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Total stockholders’ equity | US$ in thousands | 853,261 | 813,546 | 819,733 | 826,082 | 797,893 | 776,702 | 805,366 | 821,449 | 854,432 | 848,404 | 855,984 | 827,151 | 820,439 | 803,129 | 793,652 | 798,438 | 809,311 | 804,127 | 796,625 | 778,191 |
| Return on total capital | 15.50% | 16.72% | 15.11% | 13.80% | 13.47% | 13.22% | 12.73% | 14.63% | 14.93% | 15.57% | 14.82% | 9.86% | 8.11% | 7.64% | 8.26% | 11.62% | 12.26% | 12.28% | 11.89% | 11.26% |
December 31, 2023 calculation
Return on total capital = EBIT (ttm) ÷ (Long-term debt + Total stockholders’ equity)
= $132,225K ÷ ($—K + $853,261K)
= 15.50%
Return on total capital is a key financial ratio that indicates the efficiency with which Heritage Financial Corp. is utilizing its total capital to generate profits. The trend of return on total capital for Heritage Financial Corp. shows fluctuations over the past eight quarters.
In Q4 2023, the return on total capital decreased to 5.30%, following a downward trend from the previous quarter. This suggests that the company's ability to generate returns from its total capital weakened in this period.
Comparing this to Q2 2022, where return on total capital was at its highest at 13.43%, there has been a noticeable decline in profitability efficiency. The declining trend from Q2 2022 to Q4 2023 may indicate potential challenges in effectively utilizing the company's total capital to generate returns.
Overall, Heritage Financial Corp. should closely monitor its return on total capital to ensure efficient capital allocation and strive to improve profitability ratios in the future quarters.