Net Operating Profit Less (Adjusted) Taxes, otherwise known as NOPLAT, is a measure of a company’s un-leveraged profitability and is used as a basis for evaluating a firm’s performance. It looks at the firm’s earnings before interest and taxes (EBIT) and the calculated effect of deferred taxes in order to produce a realistic reflection of the company’s profits and value.

NOPLAT differs from ‘normal’ EBIT as it does not take into account the effects of tax debt, such as interest charges within the tax margins. This provides an indication of profitability which is free from the fluctuations and interference of debt, so investors can see a truer picture of the company’s finances and guiding trends.

The use of NOPLAT is a consequential part of M&A and DCF models due to its ability to accurately measure the value of a company’s free cash flow. In M&A deals, NOPLAT is used to distill the true value of a company’s assets, while DCF models use the metric to understand the company’s cash flow above the effects of tax debt and other such impacts.

Similarly, Leveraged Buy Out (LBO) models use NOPLAT to gain an understanding of the company’s earnings irrespective of any credit or financing component. Through this, investors and companies can understand the post-debt value and stability of the firm, and assess the sustainability of any potential investments.

Overall, NOPLAT is a useful measure of un-leveraged profits that helps to identify the true value of a company, alongside the costs and expectations of any potential investments. It is a useful metric employed in M&A, LBO, and DCF models and is essential in distilling the true profitability potential of any firm.