Abiomed Inc. (NASDAQ:ABMD)

The analysis of the financial metrics over the six-year period reveals distinct trends in operational efficiency, capital investment, and value creation.

Net Operating Profit After Taxes (NOPAT)

NOPAT displayed a generally positive growth trend from 2017 to 2021, increasing markedly from approximately 79.9 million USD in 2017 to nearly 260 million USD in 2021. However, in 2022, there was a significant decline, with NOPAT dropping to about 140.8 million USD, representing a substantial contraction compared to the previous year.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating marginally around 18.5%. This constancy suggests no significant changes in the company's weighted average cost of capital or risk profile over the years examined.

Invested Capital

Invested capital showed a considerable upward trend from 2017 through 2021, increasing from roughly 226.7 million USD to 737.9 million USD. This rise indicates substantial capital deployment during this timeframe. In 2022, invested capital decreased slightly to approximately 693.4 million USD, which may suggest a contraction in investment or asset base adjustments.

Economic Profit

Economic profit, calculated as the difference between NOPAT and the cost of invested capital, rose sharply from about 38.0 million USD in 2017 to a peak of 161.5 million USD in 2019. Following this peak, economic profit declined consistently, falling to roughly 12.3 million USD by 2022. This decline indicates diminishing value creation despite increasing invested capital, likely influenced by the substantial reduction in NOPAT in the most recent year.

Overall, the company expanded both its capital base and operating profits significantly until 2021, generating increasing economic profit through 2019. Nonetheless, signs of operational challenges emerged in the last two years, with declining economic profit and reduced NOPAT, alongside a slight reduction in invested capital. The stability in the cost of capital suggests that these fluctuations stem from internal operational performance rather than changes in external financing conditions or market risk.

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.

The analysis of the financial data over the six-year period reveals several important trends and changes.

Economic Profit

The economic profit increased significantly from $37,997 thousand in 2017 to a peak of $161,458 thousand in 2019. After 2019, economic profit declined, reaching $12,346 thousand in 2022, which represents a substantial decrease compared to earlier years.

Invested Capital

Invested capital displayed a consistent upward trend from $226,723 thousand in 2017 to a high of $737,876 thousand in 2021. In 2022, it slightly decreased to $693,367 thousand. Overall, there was a significant increase in invested capital over the period, more than tripling from the initial amount.

Economic Spread Ratio

The economic spread ratio showed strong performance in the earlier years, peaking at 39.88% in 2018. It then steadily declined each year, falling to 1.78% in 2022. This declining trend indicates a reduced return on invested capital relative to the cost of capital, with a sharp drop in the last year observed.

The contrast between growing invested capital and declining economic profit and economic spread ratio in recent years suggests diminishing efficiency in generating profit from the increased capital base. The peak in economic profit and spread ratio around 2018-2019 indicates a period of high profitability that was not sustained in subsequent years. The steep decreases by 2022 highlight potential challenges in maintaining value creation despite substantial investments.

Revenue Trend

The adjusted revenue demonstrates a continuous upward trajectory over the analyzed period, increasing from $447,021 thousand in 2017 to $1,033,793 thousand in 2022. The growth is steady each year, with notable acceleration between 2021 and 2022.

Economic Profit Development

Economic profit shows significant growth from 2017 through 2019, peaking at $161,458 thousand in 2019. However, from 2020 onward there is a declining trend, falling sharply to $12,346 thousand by 2022. This decline is marked particularly in the most recent year, representing a substantial decrease in profitability despite growing revenues.

Profitability Margins

The economic profit margin follows a similar pattern to economic profit. It rises from 8.5% in 2017 to a high of 20.95% in 2019, indicating increased efficiency or profitability relative to revenue during these years. Post-2019, the margin contracts steadily, reaching a low of 1.19% in 2022. This significant drop suggests rising costs, reduced pricing power, or other operational challenges affecting profitability.

Overall Insights

While the company achieved substantial revenue growth throughout the period, profitability measured by economic profit and economic profit margin exhibits a strong peak followed by decline. The divergence between rising revenue and decreasing economic profit margin in the final years signals potential issues in cost management or market conditions adversely impacting economic returns. This warrants further investigation into expense structures or pricing strategies to restore profitability.