Abiomed Inc. (NASDAQ:ABMD)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited a strong upward trend from 2017 to 2019, increasing from 79,888 thousand USD to 253,605 thousand USD. However, there was a slight decline in 2020 to 239,725 thousand USD, followed by a modest recovery in 2021 to 259,982 thousand USD. In 2022, NOPAT significantly decreased to 140,811 thousand USD, representing a notable reduction compared to previous years.

Cost of Capital

The cost of capital remained relatively stable over the entire period, fluctuating marginally around 18.5%, with values ranging narrowly between 18.5% and 18.56%. This indicates consistent capital cost assumptions during these years.

Invested Capital

Invested capital demonstrated a substantial increase from 226,723 thousand USD in 2017 to a peak of 737,876 thousand USD in 2021. This reflects significant investment or capital expansion activities. In 2022, there was a slight decrease to 693,367 thousand USD, indicating a partial reduction or stabilization of invested capital after reaching its highest level.

Economic Profit

Economic profit followed a strong positive trend from 2017 to 2019, rising from 37,936 thousand USD to 161,323 thousand USD. It then declined in 2020 to 129,390 thousand USD and continued to decrease through 2021 to 123,018 thousand USD. In 2022, economic profit sharply dropped to 12,158 thousand USD, suggesting a significant erosion in value creation relative to the invested capital and cost of capital.

Summary of Trends and Insights

Overall, the data reveals a period of growth in profitability and invested capital through 2019 and 2021, followed by a downturn in both net operating profit and economic profit in 2022. The stability of the cost of capital implies that these changes are primarily driven by operational performance and capital management rather than shifts in financing costs. The sharp decline in economic profit in 2022 signals a challenge in sustaining value creation despite maintained capital costs. This may warrant further analysis of operational efficiency and capital allocation strategies to improve financial outcomes going forward.

Net Income

The net income demonstrates an overall increasing trend from 2017 to 2021, starting at 52,116 thousand US dollars in 2017 and more than quadrupling to 225,525 thousand US dollars by 2021. However, in the latest period reported (2022), net income declined significantly to 136,505 thousand US dollars, representing a reduction of approximately 39.5% compared to 2021. This sharp decrease after several years of growth may indicate emerging operational challenges or external factors impacting profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT follows a similar upward pattern from 2017 to 2021, increasing from 79,888 thousand US dollars to a peak of 259,982 thousand US dollars in 2021. This progressive increase suggests improving operating efficiency and strong core profitability over this period. However, like net income, NOPAT experienced a noteworthy contraction in 2022, falling to 140,811 thousand US dollars, which constitutes a decrease of approximately 45.8% relative to 2021. The decrease in NOPAT correlates with the drop in net income, reinforcing the indication of decreased operational performance in the latest year.

Comparative Insights

Both profitability measures show consistent and substantial growth over the first five years reviewed, reflecting positive business momentum. The alignment in trends between net income and NOPAT suggests that the company’s profitability changes are primarily driven by operating activities rather than non-operating factors. The pronounced decline in 2022 in both metrics represents a notable deviation from prior periods, which warrants further investigation into causes such as market conditions, cost structure changes, or other external influences.

Income Tax Provision

The income tax provision fluctuates considerably over the period analyzed. It initially increased from 39,227 thousand US dollars in March 2017 to a peak of 48,267 thousand US dollars in March 2018. Subsequently, it sharply declined to 4,344 thousand US dollars in March 2019, indicating a significant reduction in tax liabilities or adjustments for that year. However, it rebounded markedly to 53,816 thousand US dollars in March 2020 and continued to rise to 62,695 thousand US dollars in March 2021 before decreasing again to 54,055 thousand US dollars in March 2022. This pattern suggests considerable variability likely influenced by changes in taxable income, tax planning strategies, or tax legislation.

Cash Operating Taxes

Cash operating taxes show an inconsistent but generally upward trend over the years. Starting at 13,626 thousand US dollars in March 2017, there is a notable decline to 5,738 thousand US dollars in March 2018. This is followed by a recovery to 12,089 thousand US dollars in March 2019. From March 2020 onwards, cash operating taxes consistently increase, reaching 20,943 thousand US dollars, 33,340 thousand US dollars in March 2021, and peaking at 51,674 thousand US dollars by March 2022. The sharp increase in recent years could reflect higher taxable operational earnings or timing differences between accounting income and tax payments.

Comparative Insights

The contrasting patterns between income tax provision and cash operating taxes are of note. While income tax provision shows extreme variability, cash operating taxes trend more steadily upwards after an initial decline. This discrepancy might indicate differences between accrued tax expenses and actual cash tax payments, possibly due to deferred tax assets or liabilities, tax credits, or changes in accounting estimates. The rise in cash taxes despite fluctuations in tax provision could imply a strengthening of the company's cash tax outflows in recent years.

The financial data over the six-year period reveals notable trends in the capital structure and equity position. There is a pronounced fluctuation in total reported debt and leases, with an initial sharp decline from 23,800 thousand USD in 2017 to 10,089 thousand USD in 2018. This is followed by moderate increases and decreases over the subsequent years, culminating in a value of 9,507 thousand USD in 2022, which remains below the initial figure in 2017. This suggests efforts to reduce or manage debt levels with some variability year-over-year.

The stockholders’ equity demonstrates consistent and substantial growth throughout the period. Starting at 452,071 thousand USD in 2017, it more than triples by 2022, reaching 1,503,326 thousand USD. This steady increase signals strengthening equity financing and accumulation of retained earnings or capital contributions, indicating a robust equity base and potentially improved financial stability over time.

Invested capital shows an overall increasing trend from 226,723 thousand USD in 2017 to a peak of 737,876 thousand USD in 2021, before a slight decline to 693,367 thousand USD in 2022. This upward movement may reflect ongoing investments in business operations, assets, or strategic initiatives. The minor decrease in the final year could be indicative of divestments, asset disposals, or revaluation adjustments.

Total Reported Debt & Leases

Initial significant reduction followed by moderate fluctuations, ending below the initial value, suggesting active debt management.

Stockholders’ Equity

Consistent and strong growth, tripling over the period, reflecting enhanced financial strength and shareholder value.

Invested Capital

General upward trend with a peak in 2021 and slight decline in 2022, indicating increased capital investment with some recent contraction.

Economic Profit

Economic profit showed a significant increase from 37,936 thousand USD in 2017 to a peak of 161,323 thousand USD in 2019. Subsequently, it experienced a decline in the following years, reaching 12,158 thousand USD by the end of 2022. This trend indicates strong profitability growth initially, followed by a sharp reduction in economic profit over the last two years.

Invested Capital

Invested capital demonstrated a consistent upward trend from 226,723 thousand USD in 2017 to a maximum of 737,876 thousand USD in 2021. There was a slight decrease in 2022 to 693,367 thousand USD. This pattern suggests ongoing investment growth, although the slight decline in the latest year may highlight a reduction in capital deployment or asset base.

Economic Spread Ratio

The economic spread ratio, indicative of the return on invested capital relative to its cost, rose sharply from 16.73% in 2017 to 39.85% in 2018, before declining to 32.42% in 2019. It continued to decrease more markedly in subsequent years, dropping to 1.75% in 2022. This decline signals a diminishing efficiency in generating returns above the cost of capital.

Overall Analysis

The data reveals a period of robust growth in profitability and capital investment in the earlier years, followed by a downturn in economic profitability and returns in the latter years. Despite the larger asset base by 2021, the diminishing economic spread ratio and falling economic profit suggest challenges in sustaining high returns on invested capital. The contraction in economic profit and spread ratio in 2022 is particularly notable, indicating reduced value creation during that period.

Economic Profit

The economic profit showed a strong upward trend from 2017 to 2019, increasing from 37,936 thousand USD in 2017 to a peak of 161,323 thousand USD in 2019. However, there was a decline starting in 2020, with values dropping to 129,390 thousand USD, and the downward trend continued through 2021 and 2022, reaching a significantly lower 12,158 thousand USD in 2022.

Adjusted Revenue

Adjusted revenue consistently increased throughout the period analyzed. Starting from 447,021 thousand USD in 2017, revenue showed steady growth year over year, culminating in 1,033,793 thousand USD by 2022. This represents more than a twofold increase over the six-year span, highlighting sustained top-line growth despite fluctuations in economic profit.

Economic Profit Margin

The economic profit margin followed a trajectory that mirrored economic profit trends. It rose notably from 8.49% in 2017 to a peak of 20.93% in 2019, indicating improved profitability relative to revenue. Following 2019, this margin declined steadily, falling to 1.18% by 2022. This sharp drop suggests a reduction in profitability efficiency, despite continued revenue growth.

Summary of Insights

Overall, the data indicates a period of rapid financial improvement up to 2019, with both economic profit and its margin peaking alongside rising revenue. Post-2019, however, there is a clear shift, where revenue continues to grow but profitability, as measured by economic profit and its margin, declines markedly. This could point to increasing costs or investments, pricing pressures, or other factors adversely affecting profit conversion rates despite higher sales volumes.