Cisco Systems Inc. (NASDAQ:CSCO)

Return on Assets (ROA)

The Return on Assets showed fluctuations over the examined periods. Initially, ROA was relatively high at 11.82% in 2020 and dipped slightly to 10.86% in 2021. It then increased to peak at 12.57% in 2022, followed by a marginal decline to 12.38% in 2023. A marked decrease occurred in 2024, where ROA dropped significantly to 8.29%, stabilizing near this lower level in 2025 with a slight increase to 8.32%. This pattern suggests a recent weakening in asset efficiency compared to previous years.

Financial Leverage

The Financial Leverage ratio displayed moderate changes across the periods. Starting at 2.5 in 2020, it decreased to 2.36 in both 2021 and 2022, then slightly declined further to 2.3 in 2023. However, 2024 saw a noticeable increase to 2.74, followed by a modest reduction to 2.61 in 2025. This indicates a recent rise in leverage, implying a greater proportion of debt relative to equity in the company's capital structure.

Return on Equity (ROE)

Return on Equity experienced a general downward trend. The highest ROE was recorded in 2022 at 29.7%, following 29.57% in 2020 and a lower 25.66% in 2021. It declined slightly to 28.44% in 2023 before falling more sharply in 2024 to 22.7%, and further to 21.73% in 2025. This suggests a reduction in the overall profitability available to shareholders, particularly in the most recent years.

Overall Insights

Analyzing the patterns collectively, there is a sign of decreasing profitability and efficiency as measured by ROA and ROE over the latter periods. At the same time, the increase in financial leverage from 2024 onwards indicates a higher risk profile due to greater reliance on debt financing. These combined trends could warrant close attention regarding operational efficiency, profitability sustainability, and capital structure management in the near term.

Net Profit Margin

The net profit margin demonstrates a general declining trend over the examined periods. Starting at 22.75% in July 2020, it fluctuates slightly with a peak at 22.91% in July 2022 but then decreases steadily to 17.97% by July 2025. This decline suggests a reduction in profitability relative to revenue over time.

Asset Turnover

Asset turnover shows minor variation but an overall downward movement in recent periods. It was 0.52 in July 2020, increased slightly to 0.56 in July 2023, but dropped significantly afterward to 0.46 by July 2025. This decline indicates a reduced efficiency in using assets to generate sales in the last two years.

Financial Leverage

Financial leverage ratios have exhibited some fluctuation. Initially, leverage decreased from 2.5 in July 2020 to 2.3 in July 2023, indicating lower reliance on debt financing. However, leverage rose again sharply to 2.74 in July 2024 before slightly declining to 2.61 in July 2025, indicating a renewed increase in borrowing or use of debt relative to equity.

Return on Equity (ROE)

Return on equity shows a notable decreasing pattern. Beginning at 29.57% in July 2020, it declined to 25.66% in July 2021, then rebounded to 29.7% in July 2022. Following this peak, ROE consistently fell, reaching 21.73% by July 2025. The weakening ROE points toward diminishing profitability from shareholders' equity over the later years.

Over the observed periods, several notable trends can be identified in the financial performance and efficiency indicators.

Tax Burden

The tax burden ratio remains relatively stable from 2020 to 2023, hovering around 0.8 to 0.84. However, a marked increase is seen in 2025, reaching 0.92, indicating a higher proportion of earnings being paid in taxes in the most recent year.

Interest Burden

The interest burden ratio shows a slight improvement from 2020 through 2022, rising from 0.96 to 0.98, suggesting lower interest expenses relative to earnings before interest and taxes. From 2023 onwards, there is a noticeable decline, falling to 0.87 in 2025, which may imply increasing interest expenses or reduced earnings before interest and taxes relative to prior years.

EBIT Margin

The EBIT margin exhibits a declining trend over the six-year span. Starting at 29.52% in 2020, it fluctuates moderately before decreasing more significantly from 24.61% in 2024 to 22.4% in 2025. This downward movement indicates a reduction in operating profitability relative to revenue.

Asset Turnover

Asset turnover remains relatively steady around 0.5 to 0.56 between 2020 and 2023, denoting consistent efficiency in utilizing assets to generate revenue. However, there is a considerable drop to 0.43 in 2024, followed by a slight recovery to 0.46 in 2025, pointing toward a recent dip in asset utilization effectiveness.

Financial Leverage

Financial leverage decreases from 2.5 in 2020 to 2.3 in 2023, suggesting a modest reduction in reliance on debt or other liabilities relative to equity. This trend reverses in 2024 with an increase to 2.74, followed by a minor reduction to 2.61 in 2025, indicating a moderate rise in leveraging in recent periods.

Return on Equity (ROE)

ROE declines overall from 29.57% in 2020 to 21.73% in 2025, with a peak in 2022 at 29.7%. The declining trend after 2022 aligns with the decreasing EBIT margin and asset turnover, reflecting a decrease in overall shareholder profitability.

In summary, the data reveal a general decline in profitability and efficiency metrics over the most recent years, with increased tax burden, reduced interest burden efficiency, and fluctuating financial leverage. The notably decreasing EBIT margin and asset turnover are key contributors to the decline in ROE, signaling challenges in maintaining operating profitability and asset utilization efficiency. The recent increase in financial leverage may amplify financial risk but could also reflect strategic financing choices under changing market conditions.

The financial data reveals notable trends in profitability and efficiency metrics over the six-year period analyzed.

Net Profit Margin

The net profit margin demonstrates a general downward trend from 22.75% in 2020 to 17.97% in 2025. Although there were minor fluctuations, including a slight increase to 22.91% in 2022, the overall pattern indicates a decline in profitability relative to revenue. The margin dropped most significantly between 2023 and 2025, falling from 22.13% to 17.97%, suggesting increased cost pressures or reduced pricing power in these years.

Asset Turnover

The asset turnover ratio remained relatively stable in the initial four-year period, hovering close to 0.52-0.56, indicating consistent efficiency in utilizing assets to generate sales. However, from 2024 onward, there was a noticeable decline to 0.43 before a slight recovery to 0.46 in 2025. This drop implies a reduction in asset utilization effectiveness, which could be attributed to increased asset base without proportional sales growth or operational inefficiencies emerging in recent years.

Return on Assets (ROA)

Return on assets followed a similar trajectory to the net profit margin. From an initial 11.82% in 2020, ROA decreased to 8.32% in 2025. This suggests that the company’s ability to generate earnings from its asset base has weakened over time. The most pronounced decline occurred after 2022, indicating diminished profitability and asset efficiency in the latter period. The drop aligns with the observed decreases in net profit margin and asset turnover, confirming a broader downward pressure on overall asset profitability.

In summary, the data points to a gradual erosion in profitability and asset utilization efficiency over the time frame. Despite some short-term stability and minor recoveries, the overall trend suggests challenges in maintaining profit margins and effectively leveraging assets to drive returns.

The financial data indicates various trends across key profitability and efficiency metrics over the six-year period under review.

Tax Burden

The tax burden ratio demonstrates a gradual increase from 0.80 in 2020 to 0.92 in 2025. This rising trend suggests that a growing proportion of pre-tax income is being absorbed by taxes, thereby potentially reducing net profitability.

Interest Burden

The interest burden ratio remains relatively stable in the early years, slightly increasing from 0.96 in 2020 to a peak of 0.98 in 2022, followed by a decline to 0.87 in 2025. The decreasing interest burden in later years points to either reduced interest expenses relative to earnings before interest and taxes or improved management of financing costs.

EBIT Margin

The EBIT margin shows a declining trend throughout the timeframe, decreasing from 29.52% in 2020 to 22.4% in 2025. This downward movement signals a reduction in operating profitability relative to revenues, which could be attributed to increased operating costs or pricing pressures.

Asset Turnover

Asset turnover fluctuates moderately, starting at 0.52 in 2020, peaking at 0.56 in 2023, and then falling to 0.46 in 2025. This suggests some instability in the efficiency with which assets are utilized to generate revenue, with a notable decline in the later years that may impact overall operational efficiency.

Return on Assets (ROA)

ROA follows a similar pattern to EBIT margin and asset turnover, with an initial increase from 11.82% in 2020 to 12.57% in 2022, followed by a decline to around 8.3% in 2025. The decreasing ROA in recent years indicates a reduction in the company's ability to generate profits from its asset base, potentially impacted by the combined effects of lower operating margins and reduced asset efficiency.

The analysis of the provided financial ratios over the six-year period reveals several notable trends in the company's profitability and efficiency in managing tax and interest expenses.

Tax Burden

The tax burden ratio has shown a gradual increase from 0.80 in 2020 to 0.92 in 2025. This indicates a rising proportion of earnings being absorbed by taxes over the years, which may suggest either changes in tax regulations, a shift in taxable income composition, or reduced tax planning efficiency.

Interest Burden

Interest burden has slightly increased from 0.96 in 2020 to a peak of 0.98 in 2022, followed by a consistent decline to 0.87 in 2025. The decrease in recent years suggests improved management of interest expenses or reduced debt levels, contributing positively to operating profitability.

EBIT Margin

The EBIT margin has generally trended downward, moving from 29.52% in 2020 to 22.4% in 2025. This indicates a decline in operating profitability relative to revenue, potentially reflecting increased operating costs, pricing pressures, or investment in lower-margin activities.

Net Profit Margin

The net profit margin has also declined over the period, from 22.75% in 2020 to 17.97% in 2025. This decrease aligns with the decline in EBIT margin but is exacerbated by the increasing tax burden, which together weigh on the company's overall profitability.

In summary, while the company has shown improvement in managing interest expenses, the increasing tax burden coupled with declining EBIT margins has resulted in a consistent decline in net profitability over the six years. These patterns suggest challenges in maintaining operational efficiency and controlling the overall cost structure amidst rising tax obligations.