Lam Research Corp. (NASDAQ:LRCX)

The analysis reveals significant fluctuations in key financial metrics over the observed periods.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrates an overall upward trend from 2019 through 2022, increasing from approximately 1.60 billion US dollars to over 5.63 billion US dollars. However, there is a notable decline beginning in 2023, with values dropping to about 4.06 billion and further decreasing to approximately 3.26 billion in 2024.

Cost of Capital

The cost of capital marginally increases over the years, starting at 17.34% in 2019 and rising steadily to 19.39% by 2024. This gradual increase suggests a rising expense or expectation of returns for using invested capital.

Invested Capital

Invested capital displays a consistent upward trajectory from nearly 9.80 billion US dollars in 2019 to around 14.99 billion in 2023, before showing a slight reduction to approximately 14.84 billion in 2024. This indicates ongoing commitments in fixed assets or similar investments over the period, with a small pullback in the most recent year.

Economic Profit

Economic profit presents the most volatile pattern. It starts negative in 2019 at about -102 million US dollars, quickly shifts to positive territory with 266 million in 2020, and peaks dramatically at over 3 billion in 2022. Following this high point, economic profit reduces substantially to roughly 1.18 billion in 2023 and declines further to 378 million in 2024, indicating diminishing value creation relative to the cost of capital during these later years.

In summary, while operational profitability increased significantly until 2022, both NOPAT and economic profit weakened thereafter. The rising cost of capital combined with stable but peaking invested capital suggests increasing pressure on returns. The recent declines in economic profit and NOPAT may warrant further investigation into operational efficiency, market conditions, or investment strategies affecting financial performance in the latest periods.

The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) of the company over the six-year period.

Net Income

Net income shows an overall increasing trend from 2019 through 2022, rising from approximately 2.19 billion USD to a peak of about 4.61 billion USD in 2022. However, after this peak, net income experienced a downward movement for the next two years, decreasing to roughly 3.83 billion USD by 2024. Despite this decline, the 2024 figure remains significantly higher than the 2019 value, indicating sustained profitability above earlier levels.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a somewhat different trajectory compared to net income. Starting at around 1.6 billion USD in 2019, it increased markedly to 5.63 billion USD in 2022, reflecting strong operational performance. Unlike net income, however, NOPAT shows a more pronounced decline after 2022, dropping to approximately 3.26 billion USD in 2024. This decrease suggests some erosion in core operating profitability, possibly linked to operational challenges or rising costs impacting after-tax profits from operations.

In summary, while both net income and NOPAT demonstrated robust growth up to fiscal year 2022, both metrics have since declined through 2024. The sharper decrease in NOPAT relative to net income may indicate operational pressures or changes in taxation and expense structures affecting core profitability. Nevertheless, the financial outcomes in 2024 remain elevated compared to the starting period in 2019, signifying continued overall financial strength despite recent downtrends.

The analysis of the provided financial data over the six-year period reveals the following trends in the tax-related items:

Provision for income taxes (US$ in thousands)

This item shows a general upward trend from 2019 to 2023, increasing from approximately 255 million in 2019 to a peak of around 598 million in 2023. The most significant increases occur between 2019 and 2021, and from 2021 to 2022. However, in 2024, there is a noticeable decline to about 532 million, indicating a reduction in the provision for income taxes despite the prior years' increases.

Cash operating taxes (US$ in thousands)

Cash operating taxes demonstrate a more volatile pattern. From 2019 to 2022, there is a consistent and substantial rise, with values increasing from about 266 million in 2019 to a high of approximately 883 million in 2022. This represents more than a threefold increase over the four years. Subsequently, in 2023 and 2024, cash operating taxes decrease to around 782 million and 718 million, respectively. Although these later figures remain significantly above the 2019 level, the decline from the peak suggests a recent reduction in cash tax payments.

Comparatively, both provisions for income taxes and cash operating taxes follow a similar upward trajectory initially, with peaks occurring in the most recent years before declining in 2024. The cash operating taxes exhibit greater volatility with proportionally larger swings, which may reflect fluctuations in taxable income or tax planning activities. The decrease in both measures in 2024 could be indicative of changes in profitability, tax rates, or tax planning strategies resulting in lower tax liabilities or cash outflows despite previous growth trends.

Total reported debt & leases

The total reported debt and leases increased noticeably from 4,564,944 thousand US dollars in mid-2019 to 5,984,094 thousand US dollars by mid-2020, indicating a significant rise in liabilities within that year. Subsequently, this figure declined to approximately 5,165,377 thousand US dollars in mid-2021 and remained relatively stable around the 5.2 million thousand US dollar mark through mid-2024, suggesting a stabilization in the company's debt levels after the initial increase.

Stockholders’ equity

Stockholders' equity exhibited a consistent upward trend over the entire period, starting at 4,673,865 thousand US dollars in mid-2019 and rising steadily to 8,539,454 thousand US dollars by mid-2024. This increase reflects a strengthening of the company’s net assets and indicates ongoing growth and accumulation of value attributable to shareholders.

Invested capital

Invested capital showed a general increasing trend from 9,801,641 thousand US dollars in mid-2019 to a peak of approximately 14,985,787 thousand US dollars in mid-2023. However, there was a slight decrease in mid-2024 to 14,840,667 thousand US dollars. This pattern suggests continued investment into operational assets over the years with a minor reduction or adjustment in the most recent period.

Economic Profit

The economic profit value displays considerable fluctuations over the examined periods. Initially, it was negative at -101,571 thousand US dollars in mid-2019, indicating a loss in economic terms. This shifted to a positive figure of 265,869 thousand US dollars by mid-2020, followed by a marked increase to 2,223,705 thousand US dollars in 2021 and a further rise to 3,076,434 thousand US dollars in 2022. However, after reaching this peak, economic profit fell significantly in the subsequent years, dropping to 1,177,439 thousand US dollars in 2023 and further down to 377,806 thousand US dollars in 2024. This pattern suggests a period of strong economic performance between 2020 and 2022, followed by a sharp decline in profitability thereafter.

Invested Capital

Invested capital consistently increased over the timeframe, starting at 9,801,641 thousand US dollars in 2019 and rising to 14,840,667 thousand US dollars in 2024. The growth trajectory is steady, with no periods of decline, indicating ongoing investment or capital deployment in the business. The rate of increase slows slightly in the last period, with a marginal decrease from 14,985,787 thousand US dollars in 2023 to 14,840,667 thousand US dollars in 2024, which may warrant further investigation.

Economic Spread Ratio

The economic spread ratio moves in line with economic profit trends, reflecting profitability relative to invested capital. From a negative value of -1.04% in 2019, it improves to 2.26% in 2020, then surges sharply to 18.13% in 2021 and reaches its highest at 22.77% in 2022. Following this peak, the ratio decreases noticeably to 7.86% in 2023 and further to 2.55% in 2024. This decline suggests a reduction in the return on invested capital despite sustained high levels of invested capital, signaling potential challenges in generating economic value at previous rates.

Summary Insights

The data depicts a strong recovery and growth phase from 2019 through 2022, characterized by rising economic profit and economic spread ratio, supported by steady capital investment. However, following 2022, both economic profit and the economic spread ratio decline substantially while invested capital remains relatively high, implying diminishing returns on investment and a potential need to reassess operational efficiency or market conditions influencing profitability.

Economic Profit Trend

The economic profit exhibited significant volatility over the analyzed periods. Initially, it presented a negative value of -101,571 thousand USD in 2019, indicating a loss. This figure transitioned to positive territory in 2020 with 265,869 thousand USD, followed by a pronounced increase peaking at 3,076,434 thousand USD in 2022. After this peak, economic profit decreased substantially to 1,177,439 thousand USD in 2023 and further declined to 377,806 thousand USD in 2024.

Adjusted Revenue Performance

Adjusted revenue showed a general upward trajectory from 2019 through 2022, rising from 9,108,864 thousand USD to a peak of 18,306,331 thousand USD. However, from 2022 onwards, revenue began to decline, registering 17,068,323 thousand USD in 2023 and further decreasing to 14,619,075 thousand USD by 2024, signaling a downward correction after years of growth.

Economic Profit Margin Analysis

The economic profit margin reflected a parallel trend to economic profit. Starting negative at -1.12% in 2019, it improved to positive margins in subsequent years, reaching a maximum of 16.81% in 2022. Following this apex, the margin diminished sharply to 6.9% in 2023 and continued to fall to 2.58% in 2024, indicating weakening profitability relative to revenue.

Overall Observations

The data indicates a period of rapid financial improvement culminating in 2022, with rising economic profitability and revenue growth. Post-2022, both revenue and economic profit margins have contracted, suggesting potential market challenges or increased costs impacting profitability. The declines in 2023 and 2024 highlight the need for attention to factors affecting revenue generation and cost management to stabilize and improve financial outcomes.