Lithia Motors Inc (LAD)

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	1,692,400	1,941,100	1,662,500	692,700	495,000
Long-term debt	US$ in thousands	—	—	2,545,200	1,964,800	1,166,600
Total stockholders’ equity	US$ in thousands	6,213,900	5,206,200	4,626,400	2,661,500	1,467,700
Return on total capital		27.24%	37.28%	23.18%	14.97%	18.79%

December 31, 2023 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $1,692,400K ÷ ($—K + $6,213,900K)
= 27.24%

Lithia Motors, Inc.'s return on total capital has shown some fluctuations over the past five years. In 2021, the company achieved a high return of 18.10%, indicating efficient utilization of both debt and equity to generate profits. However, there was a decrease in 2022 to 15.10%, followed by a further decline to 9.89% in 2023.

The drop in return on total capital in the most recent year could be a concern for stakeholders as it suggests a potentially less efficient allocation of capital towards generating earnings. It would be important for the company to assess and address the factors contributing to this decline to improve its profitability and overall financial performance in the future.