Applied Materials Inc. (NASDAQ:AMAT)

The financial data reveals several notable trends over the examined periods. The net operating profit after taxes (NOPAT) demonstrates a consistent upward trajectory from 2019 through 2022, rising from approximately $2.9 billion to $6.9 billion. However, it experiences a slight decline thereafter, falling to around $6.3 billion by 2024. This indicates a period of significant growth followed by a modest retreat in operating profitability.

The cost of capital remains relatively stable throughout the years, fluctuating marginally within a narrow range between 18.77% and 19.88%. This stability suggests consistent expectations regarding the required returns on invested capital without major shifts in perceived risk or capital structure costs.

Invested capital shows a persistent increase across the periods, expanding from roughly $10.1 billion in 2019 to $22.1 billion in 2024. This steady rise reflects ongoing capital deployment or asset growth initiatives, with the amount more than doubling over the span of six years, potentially supporting the increased operating profits observed.

Economic profit, representing the value created beyond the cost of capital, mirrors the general growth trend seen in NOPAT. It increases significantly from about $1.0 billion in 2019 to nearly $4.0 billion in 2022, signaling enhanced value creation. However, similar to NOPAT, economic profit declines in the last two years, dropping to around $2.0 billion by 2024. This reduction points to diminishing returns relative to capital employed or a tightening margin over the cost of capital.

Overall, the patterns indicate a phase of substantial growth in profitability and capital investment, succeeded by a moderation in financial performance. The consistency of the cost of capital implies that the changes in economic profit are primarily driven by operating results and capital efficiency rather than shifts in financing costs or risk perceptions.

Net Operating Profit After Taxes (NOPAT)

Consistent growth from 2019 to 2022 followed by a slight decline through 2024.

Cost of Capital

Remains stable, fluctuating within a narrow range around 19%.

Invested Capital

Substantial and steady increase, more than doubling over the period.

Economic Profit

Marked growth until 2022, then decline, indicating fluctuating value creation relative to invested capital.

The financial data reveals a general upward trend in the company's profitability over the years under review.

Net Income

Net income has shown consistent growth from 2019 through 2024. Starting at 2,706 million US dollars in 2019, it increased steadily each year to reach 7,177 million US dollars in 2024. This represents a more than doubling of net income over the six-year period, indicating strong financial performance and effective management of expenses relative to revenue.

Net Operating Profit After Taxes (NOPAT)

NOPAT also exhibited growth from 2019 through 2022, increasing from 2,934 million US dollars to 6,900 million US dollars, which reflects improvements in operating efficiency and tax management. However, there is a slight downward trend observed in the last two years, decreasing to 6,533 million in 2023 and further to 6,363 million in 2024. This suggests a potential reduction in operational efficiency or changes in tax impacts during the most recent period.

Comparing net income and NOPAT trends, it is evident that while net income maintains a robust growth path, NOPAT has begun to stabilize and slightly decline. This may indicate increased financial activities or non-operating gains contributing to net income, or possible changes in operational conditions needing further investigation.

Provision for Income Taxes

The provision for income taxes shows a general upward trend over the six-year period. Starting at $563 million in 2019, it slightly decreased to $547 million in 2020 but then increased substantially to $883 million in 2021. This upward trajectory continued with provisions of $1,074 million in 2022. A decrease occurred in 2023, with the provision falling to $860 million, followed by a rebound to $975 million in 2024. These fluctuations suggest variability in taxable income or changes in tax rates or regulations impacting the tax provision.

Cash Operating Taxes

Cash operating taxes show a consistent and pronounced increase throughout the period. Beginning at $563 million in 2019, cash taxes slightly decreased to $530 million in 2020 but then rose steadily each subsequent year: $868 million in 2021, $920 million in 2022, followed by a more marked increase to $1,215 million in 2023, and reaching $1,606 million in 2024. This substantial increase in cash taxes paid indicates growing tax liabilities settled in cash, which may reflect higher taxable income or changes in tax payment schedules and cash flow management.

Comparative Analysis

The provision for income taxes and cash operating taxes follow somewhat similar trends with both increasing from 2020 onwards, though the cash taxes show a more aggressive increase from 2022 to 2024. Notably, cash operating taxes exceeded the provision for income taxes from 2023 onwards, implying potential timing differences between accrued tax expenses and actual tax payments or adjustments such as payment of prior year liabilities or changes in deferred tax balances.

The financial data reveals several notable trends over the six-year period. Total reported debt and leases increased steadily from 5,464 million US dollars in 2019 to 6,605 million US dollars in 2024. This represents a moderate but consistent growth in the company's financial obligations, suggesting an ongoing strategy involving increased leverage or financing through debt instruments.

Stockholders’ equity exhibited significant growth, rising from 8,214 million US dollars in 2019 to 19,001 million US dollars in 2024. This increase reflects a strengthening equity base, which may be attributed to retained earnings, new equity issuances, or asset revaluation. The growth in equity outpaces the growth in reported debt, indicating an overall improvement in the company’s financial position from an equity perspective.

Invested capital also demonstrated a rising trend, growing from 10,129 million US dollars in 2019 to 22,135 million US dollars in 2024. This metric encompasses both equity and debt financing, and its increase corresponds with the observed growth in both debt and equity. The substantial growth in invested capital suggests increased investment in company assets, potentially aimed at supporting expansion or enhancing operational capacity.

Overall, the data indicates a company that is incrementally increasing its financial leverage while simultaneously enhancing its equity base and investing more capital into the business. This balanced growth in debt and equity, coupled with the substantial rise in invested capital, may imply strategic investments geared toward long-term growth objectives.

Economic Profit

The economic profit shows a notable upward trend from 2019 to 2022, increasing from $1,033 million to a peak of $3,986 million. However, starting in 2023, economic profit declined significantly, falling to $2,999 million and further to $1,984 million by 2024. This indicates a period of strong growth followed by a substantial reduction in profitability in recent years.

Invested Capital

Invested capital consistently increased throughout the entire period examined. It rose from $10,129 million in 2019 to $22,135 million in 2024. The growth accelerated notably after 2021, with large increments in 2023 and 2024, suggesting sustained or increased investment activities or asset growth by the company despite the declining economic profit in the later years.

Economic Spread Ratio

The economic spread ratio improved progressively from 10.2% in 2019 to a peak of 26.77% in 2022. This signifies enhanced returns relative to the cost of capital during this period. However, starting in 2023, the ratio dropped sharply to 16.87% and then further to 8.96% in 2024. This decline reflects a reduced efficiency in generating economic profit from the invested capital in the most recent years analyzed.

Economic Profit

The economic profit exhibited an overall upward trajectory from 2019 to 2022, increasing from 1033 million USD to a peak of 3986 million USD in 2022. However, starting in 2023, the trend reversed, with economic profit declining to 2999 million USD and further dropping to 1984 million USD in 2024. This indicates a weakening in profitability after a period of significant growth.

Net Revenue

Net revenue consistently grew throughout the entire period under review, rising from 14,608 million USD in 2019 to 27,176 million USD in 2024. Although the growth rate appears to have slowed between 2023 and 2024, the company maintained positive revenue progression, indicating sustained business expansion or increased sales volume.

Economic Profit Margin

The economic profit margin mirrored the pattern observed in economic profit, increasing steadily from 7.07% in 2019 to a high of 15.46% in 2022. Following this, the margin sharply contracted to 11.31% in 2023 and further to 7.3% in 2024, approaching levels similar to those recorded in 2019. This suggests that, despite revenue growth, the company faced declining efficiency or higher costs impacting its profitability ratios in the most recent periods.

Summary

While the company demonstrated strong revenue growth across the six-year span, the economic profit and economic profit margin reveal a peak in profitability in 2022, followed by a marked decline in the subsequent two years. This divergence between revenue growth and profitability metrics may point to rising operational costs, competitive pressures, or other factors eroding economic gains. Continuous monitoring of these trends is vital to understand the underlying causes and to implement corrective measures if needed.