Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Align Technology Inc., profitability ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The profitability profile across the analyzed five-year period demonstrates significant volatility, characterized by a substantial anomaly in 2020 and a general downward trajectory in efficiency and return metrics by the end of 2022.
- Margin Analysis
- Gross profit margins remained relatively resilient, fluctuating between 70.52% and 74.26%. While a slight peak occurred in 2021, the margin reached its lowest point in 2022, indicating a compression in the core cost of goods sold relative to revenue.
- Operating profit margins exhibited greater instability, dropping from 23.73% in 2018 to 15.66% in 2020, before recovering to 24.70% in 2021 and subsequently falling to 17.21% in 2022. This suggests inconsistency in managing operating expenses over the period.
- Net profit margins show a highly irregular pattern, most notably a spike to 71.84% in 2020, which deviates sharply from the baseline of approximately 18-20% seen in other years. By 2022, the net profit margin declined to 9.68%, the lowest value in the sequence.
- Return Metrics
- Return on Equity (ROE) followed a trajectory of initial stability, a peak of 54.92% in 2020, and a subsequent steep decline to 10.04% by 2022. This suggests a diminishing ability to generate profit from shareholders' equity.
- Return on Assets (ROA) mirrored the ROE trend, peaking at 36.77% in 2020 and falling consistently thereafter to 6.08% in 2022. The correlation between the ROA and ROE declines indicates a broad reduction in overall asset productivity.
In summary, while gross margins remained largely stable, the company experienced a significant contraction in net profitability and return ratios between 2021 and 2022, following an atypical surge in profitability during 2020.
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Return on Sales
Return on Investment
Gross Profit Margin
Align Technology Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 2,633,775) | 2,935,355) | 1,763,235) | 1,743,897) | 1,447,867) | |
| Net revenues | 3,734,635) | 3,952,584) | 2,471,941) | 2,406,796) | 1,966,492) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 70.52% | 74.26% | 71.33% | 72.46% | 73.63% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Abbott Laboratories | 51.54% | 52.21% | — | — | — | |
| Elevance Health Inc. | 16.79% | 17.09% | — | — | — | |
| Intuitive Surgical Inc. | 67.44% | 69.32% | — | — | — | |
| Medtronic PLC | 67.98% | 65.19% | — | — | — | |
| UnitedHealth Group Inc. | 24.09% | 23.60% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Gross profit margin = 100 × Gross profit ÷ Net revenues
= 100 × 2,633,775 ÷ 3,734,635 = 70.52%
2 Click competitor name to see calculations.
Between 2018 and 2022, net revenues and gross profit exhibited a general upward trajectory, despite a contraction in the final year of the period. Net revenues increased from US$ 1,966,492 thousand in 2018 to a peak of US$ 3,952,584 thousand in 2021, before declining to US$ 3,734,635 thousand in 2022. Gross profit followed a nearly identical pattern, peaking in 2021 at US$ 2,935,355 thousand.
- Gross Profit Margin Trends
- The gross profit margin experienced a period of gradual compression between 2018 and 2020, moving from 73.63% down to 71.33%. This trend was abruptly reversed in 2021, where the margin reached its five-year high of 74.26%. However, 2022 saw a sharp decline to 70.52%, which represents the lowest margin within the analyzed timeframe.
- Revenue and Profit Correlation
- The most significant growth phase occurred between 2020 and 2021, where net revenues rose by approximately 59.6%. This surge in volume coincided with the highest margin efficiency of the period, indicating an optimized cost structure or favorable pricing dynamics during that fiscal year.
- Analysis of 2022 Margin Contraction
- In 2022, the simultaneous decrease in both net revenues and the gross profit margin suggests a period of heightened operational costs or reduced pricing power. The drop to 70.52% indicates that the cost of goods sold increased disproportionately relative to the revenue generated, erasing the margin gains achieved in the previous year.
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Operating Profit Margin
Align Technology Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Income from operations | 642,595) | 976,400) | 387,171) | 542,493) | 466,564) | |
| Net revenues | 3,734,635) | 3,952,584) | 2,471,941) | 2,406,796) | 1,966,492) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 17.21% | 24.70% | 15.66% | 22.54% | 23.73% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Abbott Laboratories | 19.16% | 19.56% | — | — | — | |
| Elevance Health Inc. | 4.94% | 5.15% | — | — | — | |
| Intuitive Surgical Inc. | 25.35% | 31.89% | — | — | — | |
| Medtronic PLC | 18.15% | 14.89% | — | — | — | |
| UnitedHealth Group Inc. | 8.83% | 8.40% | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Health Care Equipment & Services | 9.26% | 9.13% | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Health Care | 18.74% | 18.04% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating profit margin = 100 × Income from operations ÷ Net revenues
= 100 × 642,595 ÷ 3,734,635 = 17.21%
2 Click competitor name to see calculations.
The operating profit margin exhibited significant volatility between 2018 and 2022, characterized by a sharp contraction in 2020, a strong recovery in 2021, and a subsequent decline in 2022.
- Margin Volatility and Early Trends
- From 2018 to 2019, the operating profit margin remained relatively stable, moving from 23.73% to 22.54% despite an increase in net revenues from 1,966,492 thousand US$ to 2,406,796 thousand US$. However, a substantial decline occurred in 2020, where the margin dropped to its five-year low of 15.66%. This downturn was driven by a decrease in income from operations to 387,171 thousand US$, even as net revenues showed slight growth.
- Peak Operational Efficiency
- The year 2021 marked a period of aggressive expansion and recovery. Net revenues surged to 3,952,584 thousand US$, and income from operations increased sharply to 976,400 thousand US$. This resulted in the highest operating profit margin of the period at 24.70%, indicating a strong capacity to scale operations while improving profitability.
- Revenue and Profitability Contraction
- A downward trend emerged in 2022, as net revenues decreased to 3,734,635 thousand US$. A more pronounced decline was observed in income from operations, which fell to 642,595 thousand US$. This led to a compression of the operating profit margin to 17.21%, suggesting that operating costs did not decrease proportionally with the reduction in revenue.
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Net Profit Margin
Align Technology Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 361,573) | 772,020) | 1,775,888) | 442,776) | 400,235) | |
| Net revenues | 3,734,635) | 3,952,584) | 2,471,941) | 2,406,796) | 1,966,492) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 9.68% | 19.53% | 71.84% | 18.40% | 20.35% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Abbott Laboratories | 15.88% | 16.42% | — | — | — | |
| Elevance Health Inc. | 3.87% | 4.46% | — | — | — | |
| Intuitive Surgical Inc. | 21.25% | 29.85% | — | — | — | |
| Medtronic PLC | 15.90% | 11.97% | — | — | — | |
| UnitedHealth Group Inc. | 6.25% | 6.06% | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Health Care Equipment & Services | 7.05% | 7.14% | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Health Care | 14.65% | 15.24% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net profit margin = 100 × Net income ÷ Net revenues
= 100 × 361,573 ÷ 3,734,635 = 9.68%
2 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by significant volatility in net income and profit margins, contrasting with a general growth trend in net revenues that peaked in 2021.
- Revenue Trajectory
- Net revenues exhibited a consistent upward trend for the majority of the period, rising from US$ 1.966 billion in 2018 to a peak of US$ 3.952 billion in 2021. This growth trend reversed slightly in 2022, with revenues contracting to US$ 3.734 billion.
- Net Income Fluctuations
- Net income displayed an irregular pattern, beginning at US$ 400.2 million in 2018 and experiencing a sharp, anomalous increase to US$ 1.775 billion in 2020. This peak was followed by a significant decline to US$ 772 million in 2021 and a further drop to US$ 361.5 million in 2022, ending the period below 2018 levels.
- Net Profit Margin Analysis
- The net profit margin remained relatively stable between 2018 and 2019, hovering around 18% to 20%. A significant outlier occurred in 2020, where the margin surged to 71.84%, suggesting the influence of non-operational gains or one-time events that decoupled net income from revenue. In the subsequent two years, a downward trend is observed, with the margin returning to 19.53% in 2021 before falling to a period low of 9.68% in 2022, indicating a substantial contraction in overall profitability.
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Return on Equity (ROE)
Align Technology Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 361,573) | 772,020) | 1,775,888) | 442,776) | 400,235) | |
| Stockholders’ equity | 3,601,358) | 3,622,714) | 3,233,865) | 1,346,169) | 1,252,891) | |
| Profitability Ratio | ||||||
| ROE1 | 10.04% | 21.31% | 54.92% | 32.89% | 31.94% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Abbott Laboratories | 18.90% | 19.75% | — | — | — | |
| Elevance Health Inc. | 16.59% | 16.93% | — | — | — | |
| Intuitive Surgical Inc. | 11.98% | 14.32% | — | — | — | |
| Medtronic PLC | 9.59% | 7.01% | — | — | — | |
| UnitedHealth Group Inc. | 25.87% | 24.09% | — | — | — | |
| ROE, Sector | ||||||
| Health Care Equipment & Services | 18.40% | 17.28% | — | — | — | |
| ROE, Industry | ||||||
| Health Care | 24.82% | 25.44% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 361,573 ÷ 3,601,358 = 10.04%
2 Click competitor name to see calculations.
The return on equity (ROE) for the period between 2018 and 2022 exhibits significant volatility, characterized by a sharp peak in 2020 followed by a sustained downward trend.
- Return on Equity (ROE) Trend
- ROE remained relatively stable between 2018 and 2019, moving from 31.94% to 32.89%. A substantial increase occurred in 2020, where the ratio reached a peak of 54.92%. However, a precipitous decline followed, with ROE falling to 21.31% in 2021 and further contracting to 10.04% by the end of 2022.
- Net Income Volatility
- The fluctuations in ROE are closely tied to the volatility of net income. After modest growth in 2019, net income experienced an exceptional surge in 2020, reaching US$ 1,775,888 thousand. This was followed by a sharp reversal; earnings fell to US$ 772,020 thousand in 2021 and continued to decline to US$ 361,573 thousand in 2022, a level lower than that recorded in 2018.
- Stockholders' Equity Expansion
- The equity base underwent a significant expansion between 2019 and 2020, increasing from US$ 1,346,169 thousand to US$ 3,233,865 thousand. This expanded equity position remained elevated through 2021 and 2022, stabilizing around US$ 3.6 billion. The increase in the denominator (equity) coupled with the decrease in the numerator (net income) served as the primary driver for the compression of the ROE in the latter part of the period.
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Return on Assets (ROA)
Align Technology Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 361,573) | 772,020) | 1,775,888) | 442,776) | 400,235) | |
| Total assets | 5,947,947) | 5,942,110) | 4,829,683) | 2,500,702) | 2,052,458) | |
| Profitability Ratio | ||||||
| ROA1 | 6.08% | 12.99% | 36.77% | 17.71% | 19.50% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Abbott Laboratories | 9.31% | 9.40% | — | — | — | |
| Elevance Health Inc. | 5.86% | 6.26% | — | — | — | |
| Intuitive Surgical Inc. | 10.19% | 12.58% | — | — | — | |
| Medtronic PLC | 5.54% | 3.87% | — | — | — | |
| UnitedHealth Group Inc. | 8.19% | 8.15% | — | — | — | |
| ROA, Sector | ||||||
| Health Care Equipment & Services | 7.49% | 7.28% | — | — | — | |
| ROA, Industry | ||||||
| Health Care | 9.66% | 9.46% | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 361,573 ÷ 5,947,947 = 6.08%
2 Click competitor name to see calculations.
The Return on Assets (ROA) exhibits significant volatility over the analyzed five-year period, characterized by a substantial peak in 2020 followed by a consistent and sharp decline through 2022. While the organization experienced a period of rapid asset expansion and a temporary surge in profitability, the most recent data indicates a diminishing efficiency in utilizing the asset base to generate net income.
- Net Income Trends
- Net income remained relatively stable between 2018 and 2019 before experiencing an extraordinary increase in 2020, reaching a peak of US$ 1,775,888 thousand. However, this growth was not sustained, as net income declined significantly in 2021 and further contracted in 2022 to US$ 361,573 thousand, a level lower than the 2018 baseline.
- Total Asset Expansion
- The asset base underwent aggressive growth, increasing from US$ 2,052,458 thousand in 2018 to US$ 5,947,947 thousand by 2022. A particularly rapid expansion occurred between 2019 and 2021, where total assets more than doubled. Growth plateaued between 2021 and 2022, with assets remaining nearly constant.
- Return on Assets (ROA) Analysis
- The ROA followed a non-linear trajectory, starting at 19.50% in 2018 and peaking at 36.77% in 2020, driven by the surge in net income. Subsequent years saw a precipitous drop to 12.99% in 2021 and a further decline to 6.08% in 2022. This downward trend suggests that the increase in total assets has not yielded proportional increases in profitability, leading to a marked reduction in asset productivity.
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