Lear Corporation (LEA)

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	854,400	560,000	603,400	352,000	991,700
Long-term debt	US$ in thousands	2,464,500	2,600,000	2,868,600	2,633,300	2,293,700
Total stockholders’ equity	US$ in thousands	4,918,800	4,678,800	4,643,400	4,467,300	4,349,700
Return on total capital		11.57%	7.69%	8.03%	4.96%	14.93%

December 31, 2023 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $854,400K ÷ ($2,464,500K + $4,918,800K)
= 11.57%

Lear Corp.'s return on total capital has exhibited fluctuating trends over the past five years. In 2023, the return on total capital improved significantly to 12.78% compared to 9.43% in 2022. This indicates that the company generated $12.78 in operating income for every $100 of total capital invested. The increase in 2023 suggests an enhancement in the company's operational efficiency and profitability, potentially due to effective capital allocation and cost management.

In 2021 and 2022, the return on total capital remained relatively stable, with values of 9.55% and 9.43% respectively. This consistency could indicate a sustained performance in utilizing its total capital to generate returns. However, the return on total capital saw a decline in 2020 to 7.12%, which may raise concerns about the company's ability to generate sufficient returns on its invested capital during that period.

The highest return on total capital was observed in 2019 at 16.38%, reflecting a strong performance in efficiently utilizing its total capital to generate profits. This exceptional performance in 2019 may have been influenced by various factors such as effective cost control measures, strategic investments, or favorable market conditions.

Overall, while Lear Corp.'s return on total capital has shown variability over the last five years, the significant improvement in 2023 is a positive sign for the company's operational efficiency and profitability. It is essential for the company to consistently monitor and enhance its return on total capital to ensure sustainable and profitable growth in the long term.