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Net operating profit before-tax (NOPBT) is the unlevered, before-tax operating cash generated by a business. It represents the true, normal and recurring before-tax profitability of a business. GAAP earnings or, even worse, non-GAAP earnings, are highly unreliable and are subject to misleading management manipulation.

NOPBT is a very important value because it is the pre-tax version of net operating profit after-tax (NOPAT), which is the numerator in our return on invested capital (ROIC) calculation, Figure 1 provides the simplified formula for calculating NOPBT.

Figure 1: How to Calculate NOPBT – Simplified

Sources: New Constructs, LLC and company filings

Figure 2 shows how we calculate NOPBT margin. NOPBT margin measures the amount of NOPBT generated from a firm’s total operating revenue and provides insights into the operating efficiency of a business.

Figure 2: How to Calculate NOPBT Margin

NOPBT / Total Operating Revenue = NOPBT Margin

Sources: New Constructs, LLC and company filings

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