NOPAT (net operating profit after tax)

Also called: net operating profit after tax

The profit the core business would make if it had no debt: operating profit minus the tax on it. It strips out how the company is financed.

Formula

NOPAT = EBIT × (1 − Tax rate)

Worked example

1. EBIT (operating income) = $2.0bn
2. Tax rate = $400m tax ÷ $1.9bn pre-tax income = 21.1%
3. NOPAT = $2.0bn × (1 − 21.1%)

Result: $1.6bn

How to read it

NOPAT is the starting point for ROIC and for many valuation models. Comparing NOPAT with invested capital shows how well management uses money.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)