Costco Wholesale Corp. (NASDAQ:COST)

The analysis of the quarterly financial data over multiple periods reveals distinct trends in Return on Assets (ROA), Financial Leverage, and Return on Equity (ROE).

Return on Assets (ROA)

The ROA exhibits an overall upward trend from the earliest recorded value of 7.26% onwards. Initial fluctuations appear between 7.17% and 8.45%, showing moderate variability. From the period around Nov 2021, ROA progressively increases, reaching values above 10% in the most recent quarters. This steady improvement indicates enhanced efficiency in asset utilization over time.

Financial Leverage

Financial leverage ratios show moderate volatility during the early periods, ranging roughly between 2.75 and 4.05. Peaks occur around Nov 2020 and subsequently in early 2024 with values above 3.0, while the lowest ratios are observed between 2.75 and 2.78 in more recent quarters. The trend suggests fluctuating leverage but with a slight tendency toward normalization at lower levels in later periods, implying a more conservative capital structure or reduced reliance on debt financing.

Return on Equity (ROE)

ROE demonstrates significant variability with an initial range around 21% to 24% and a notable peak at 29.1% in early 2021. Following this peak, a general declining pattern is observed but values remain relatively high in the mid-20s to low 30% range. Recent quarters show an increase surpassing 30%, with the highest peaks of approximately 32.95%. The fluctuations in ROE alongside shifts in financial leverage and ROA point to the impact of both operational performance and capital structure changes on shareholder returns.

In summary, the data suggest an improvement in asset efficiency as indicated by the rising ROA, coupled with a cautious modulation of financial leverage. The ROE trends reflect the combined effects of these factors, showing strong profitability for shareholders with periods of heightened returns likely supported by leverage adjustments and operational gains.

Net Profit Margin

The net profit margin shows a generally stable pattern with values ranging from approximately 2.36% to 2.98% over the observed periods. Initially, the margin was about 2.45%, followed by a slight dip during early 2020, likely reflecting economic challenges at that time. From late 2020 onward, a consistent upward trend is noted, peaking around 2.98% before a minor decrease to approximately 2.94%-2.97% near the latest period. Overall, the margin exhibits resilience and gradual improvement, indicating effective cost management or pricing strategies.

Asset Turnover

Asset turnover demonstrates variability but generally maintains a high utilization ratio, fluctuating mostly between 2.8 and 3.7. The early periods show a drop from around 3.29 to 2.81 in early 2021, suggesting a slight reduction in efficiency or asset base expansion. However, from mid-2021, there is a recovery and upward movement peaking near 3.68, signifying improved efficiency in generating revenue from assets. Recent data reflects a slight decline but remains above 3.4, indicating sustained effective asset usage despite minor fluctuations.

Financial Leverage

Financial leverage shows a declining trend over time, starting at about 3.33 and decreasing towards levels near 2.78 by the latest periods. Notably, a significant spike near 4.05 occurs in late 2020 but is transient and followed by a consistent reduction. The downward trend suggests a strategic reduction in reliance on debt or increased equity financing, potentially to strengthen financial stability. The leverage ratio stabilizes in the lower 3s in recent quarters, indicating a moderate capital structure.

Return on Equity (ROE)

ROE experienced fluctuations with an overall declining tendency in the earlier periods, dropping from just over 24% to as low as approximately 21.89%. A marked increase starts in early 2020 with a peak reaching around 29.1%, highlighting a period of enhanced profitability or capital efficiency. This upward trend continues with minor variations, culminating in a peak above 32% in early 2024. The most recent periods show a slight downtrend from this peak but remain robust in the high 20% to low 30% range. This pattern indicates strong and improving shareholder returns with some volatility likely tied to operational performance and leverage changes.

Tax Burden

The tax burden ratio remains relatively stable throughout the analyzed periods, generally fluctuating between 0.74 and 0.76. This indicates consistent tax efficiency, with a slight decline around late 2022 and early 2023 before stabilizing again around 0.75.

Interest Burden

The interest burden ratio shows minimal variation, maintaining values close to 0.97 to 0.99. This stability suggests that interest expenses have a consistent impact on earnings over the periods, with a slight upward trend toward 0.99 in recent periods.

EBIT Margin

The EBIT margin exhibits a gradual upward trend from around 3.26% to over 4.0% by the final reported period. This improvement in operating profitability indicates increasing efficiency in generating earnings before interest and taxes relative to revenue.

Asset Turnover

Asset turnover shows fluctuations across quarters, beginning near 3.29, decreasing mid-period to levels close to 2.81, then increasing again to peak around 3.68 before slightly declining toward 3.49 by the end. This pattern suggests variability in how effectively assets are deployed to generate sales but overall maintains a relatively high turnover ratio above 3.

Financial Leverage

Financial leverage demonstrates a decline from values above 3.3 initially to a low near 2.75 in the early 2020s, indicative of a gradual reduction in the use of debt financing relative to equity. However, leverage rises again intermittently, reaching over 3.1 and then settling near 2.78 by the last period, showing moderate reliance on financial leverage.

Return on Equity (ROE)

ROE experiences some volatility, starting near 24%, dipping to around 21.89%, then spiking sharply to above 29% in early 2020. It remains generally in the high twenties with a peak over 32% around 2023-2024, before declining slightly to approximately 28.9% by the end. This pattern suggests overall strong profitability with notable peaks that correspond to periods of potentially higher operational efficiency or leverage.

The financial ratios exhibit various trends over the analyzed periods, reflecting changes in profitability, asset utilization, and overall performance.

Net Profit Margin (%)

The net profit margin shows a gradual but consistent upward trend from the initial periods into the latest ones. Starting at around 2.44% to 2.47%, the margin slightly fluctuates but generally improves over time, reaching values close to 2.97% towards the end of the series. This increase indicates an improvement in the company's ability to convert sales into actual profit, suggesting enhanced cost management or pricing strategies.

Asset Turnover (ratio)

The asset turnover ratio displays some volatility but maintains an overall stable pattern. Early values hover near 3.0, with slight declines and recoveries throughout the timeline. Notably, notable peaks occur around periods with values exceeding 3.5, indicating periods of more efficient use of assets to generate revenue. The ratio peaks around 3.68 during one period and remains relatively strong thereafter, implying consistent effectiveness in asset utilization.

Return on Assets (ROA) (%)

ROA reflects an upward trend over time, with some fluctuations. Starting from approximately 7.2%, it advances steadily to exceed 10% in later periods. This trend suggests an overall improvement in the company's profitability relative to its asset base. The increase in ROA aligns with the observed trend in net profit margin and asset turnover, reinforcing the conclusion of strengthening operational efficiency and financial performance.

In summary, the data indicates a positive trajectory in profitability and asset efficiency. The net profit margin and ROA improvements point to stronger earnings capacity, while the asset turnover ratio's relative stability and occasional peaks suggest sustained operational effectiveness. Together, these ratios highlight an improving trend in the company's financial health over the reported periods.

Tax Burden

The tax burden ratio remains relatively stable throughout the observed periods, fluctuating narrowly around 0.75. Starting at approximately 0.78 in late 2019, it slightly declined to 0.74 by late 2023 before mildly recovering to 0.75 by mid-2025. This indicates a consistent effective tax rate with minor variability over time.

Interest Burden

The interest burden ratio exhibits minimal change, maintaining a consistent level close to 0.97–0.99 throughout the periods. This suggests stable interest expenses relative to earnings before interest and taxes, with no significant fluctuations impacting operational profitability.

EBIT Margin

The EBIT margin shows a gradual upward trend from around 3.26% in late 2019 to over 4.00% by mid-2025. The increase is steady, with minor fluctuations ranging between 3.23% and 4.01%. This reflects a slow but consistent improvement in operational efficiency and profitability at the earnings before interest and tax level.

Asset Turnover

The asset turnover ratio demonstrates some variability across periods. Initially, it decreases from about 3.29 to a low near 2.81, indicating a reduction in how efficiently assets generate sales. Subsequently, it recovers gradually, reaching approximately 3.54 by mid-2025. This pattern points toward periodic shifts in asset utilization effectiveness, with recent periods showing strengthened efficiency.

Return on Assets (ROA)

Return on assets exhibits a general positive trajectory with some intermediate fluctuations. It begins near 8.06% in late 2019, experiences mild troughs around 7.17%, and then climbs steadily to exceed 10.3% by mid-2025. The improvement in ROA aligns with rising EBIT margins and partially recovering asset turnover, indicating enhanced overall profitability relative to total assets over time.

The financial ratios presented reveal a consistent and stable operational performance over the analyzed periods, with some positive trends particularly noticeable in profitability measures.

Tax Burden Ratio

This ratio remains relatively stable throughout the periods, fluctuating narrowly around 0.75. The slight variations indicate a consistent effective tax rate impacting the company's earnings before and after taxes without significant deviation.

Interest Burden Ratio

The interest burden ratio shows remarkable stability at approximately 0.97 to 0.99, suggesting that interest expenses have been consistent relative to earnings before interest and taxes. This implies that financing costs have not dramatically influenced profitability during the observed quarters.

EBIT Margin (%)

There is a gradual upward trend in the Earnings Before Interest and Taxes (EBIT) margin, increasing from near 3.26% to just over 4.0% by the latest quarter. This steady increase reflects improving operational efficiency or pricing power, contributing to greater profitability at the operating level.

Net Profit Margin (%)

The net profit margin similarly shows a positive trend, advancing from approximately 2.45% to nearly 3.0% over the reported periods. This increase suggests enhanced overall profitability, potentially driven by improved cost management, effective tax planning, and sustained revenue growth.

Overall, the company exhibits a pattern of controlled costs related to interest and taxes, combined with gradually improving margins at both EBIT and net profit levels. These trends indicate improving operational performance and profitability stability across the quarters analyzed.