Shockwave Medical Inc. (NASDAQ:SWAV)

The analysis of the key financial ratios over the five-year period reveals significant fluctuations in the company's profitability and leverage positions.

Return on Assets (ROA)

The ROA exhibited a noteworthy improvement from 2019 through 2023. Initially, the company experienced negative returns on assets, with -22.04% in 2019 worsening slightly to -24.15% in 2020. A substantial positive turnaround occurred in 2021, where ROA improved dramatically to -2.64%. This upward trend continued into 2022, reaching a peak of 33.43%, before moderating to 9.4% in 2023. This pattern indicates a transition from operating losses relative to asset base to achieving profitability, although there was a decline after the peak in 2022.

Financial Leverage

Financial leverage ratios remained relatively stable from 2019 to 2022, fluctuating narrowly between 1.2 and 1.43. However, in 2023, there was a significant increase to 2.34, indicating a notable uptick in the use of debt or other liabilities relative to equity. This change suggests a strategic shift or increased borrowing, which could impact the company's risk profile and cost of capital.

Return on Equity (ROE)

The ROE mirrored the ROA trend, starting with negative returns at -26.53% in 2019 and worsening to -29.11% in 2020. A marked recovery was evident in 2021 with ROE improving close to break-even at -3.78%. By 2022, ROE surged significantly to 42.24%, surpassing the previous losses and reflecting strong shareholder returns. In 2023, ROE reduced to 22.03%, maintaining positive profitability but at a diminished rate compared to the prior year. The correspondence between ROE and ROA patterns, alongside increased financial leverage in 2023, highlights the leverage’s amplification effect on equity returns.

Overall, the data suggest the company moved from considerable operating losses toward profitability between 2019 and 2022. The sharp increase in financial leverage in 2023 may have contributed to sustaining positive, though reduced, returns on equity. Monitoring the implications of heightened leverage will be crucial for assessing future financial stability and profitability trends.

The analysis of the financial ratios over the five-year period reveals significant shifts in the company's profitability, efficiency, leverage, and overall equity returns.

Net Profit Margin

The net profit margin showed a marked improvement from a deeply negative -119.06% in 2019 to a positive 44.1% in 2022, indicating a transition from substantial losses to profitability. However, in 2023, the margin declined to 20.17%, though it remained positive, suggesting some earnings pressure compared to the previous year but still reflecting profitability.

Asset Turnover

Asset turnover improved substantially from 0.19 in 2019 to a peak of 0.76 in 2022, indicating increased efficiency in using assets to generate sales. In 2023, this ratio declined to 0.47, which may signal decreased asset utilization or sales generation relative to asset base compared to the prior year.

Financial Leverage

Financial leverage remained relatively stable around 1.2 until 2020, followed by an increase to 1.43 in 2021. It dipped slightly to 1.26 in 2022 before rising sharply to 2.34 in 2023, reflecting a significant increase in the use of debt or other liabilities relative to equity. This higher leverage could introduce additional financial risk.

Return on Equity (ROE)

ROE followed a trajectory similar to net profit margin, moving from negative values (-26.53% in 2019 and -29.11% in 2020) to a positive 42.24% in 2022, indicating a substantial increase in profitability relative to shareholder equity. The ratio then declined to 22.03% in 2023, suggesting a decrease in profitability or efficiency in generating returns on equity compared to the previous year, but still maintaining positive performance.

Overall, the company demonstrated a strong recovery from negative profitability to positive earnings by 2022, accompanied by improved asset efficiency. The rise in financial leverage in the latest period may reflect strategic financing decisions that warrant monitoring due to potential increased risk. Both profitability and return metrics showed some decline in the most recent year but remained positive, indicating a need to assess sustainability of this performance amid changing financial leverage and asset utilization.

The financial data reveal several notable trends over the analyzed periods. The EBIT margin exhibits a significant improvement, transitioning from deeply negative values in 2019 and 2020 (-116.72% and -95.01%, respectively) to a positive and stable margin above 24% in 2022 and 2023. This shift marks substantial operational progress and enhanced profitability before interest and taxes.

Return on Equity (ROE) follows a similar trajectory, initially recording negative returns (-26.53% in 2019 and -29.11% in 2020) before turning positive in 2021 and notably peaking at 42.24% in 2022. Although it declines to 22.03% in 2023, the ROE remains in positive territory, indicating improved shareholders' value creation compared to the early years.

Asset turnover increased markedly from 0.19 in 2019 to a peak of 0.76 in 2022, reflecting enhanced efficiency in using assets to generate revenue. However, this metric decreased to 0.47 in 2023, suggesting some slowdown or asset base expansion without a proportionate increase in sales during the latest period.

Financial leverage shows moderate stability from 2019 through 2022, fluctuating between 1.2 and 1.43, but then rises significantly to 2.34 in 2023. This increase indicates greater use of debt or other financial obligations relative to equity, suggesting a shift toward a more leveraged capital structure in the most recent year.

The interest burden remains relatively stable in the last two reported periods, with marginal decreases from 0.98 in 2022 to 0.96 in 2023, implying consistent ability to cover interest expenses from operating earnings. The tax burden decreases notably from 1.79 to 0.85 during the same timeframe, possibly indicating increased tax efficiency or changes in tax expenses relative to pretax income.

Overall, the data depict a company that has transitioned from significant losses and low operational efficiency toward profitability and stronger returns on equity, albeit with some volatility in asset utilization and increased financial leverage in the most recent year. The improved EBIT margin and ROE combined with shifts in leverage warrant attention to capital structure management and sustaining operational momentum.

Net Profit Margin

The net profit margin exhibits a significant positive shift over the analyzed period. Initially, the margin was deeply negative at -119.06% in 2019, indicating substantial losses relative to sales. This deficit lessened in 2020 to -96.92%, further improving markedly to -3.85% in 2021. A major turnaround is observed in 2022, with a positive margin of 44.1%, suggesting the company became substantially profitable. However, in 2023, the margin declined to 20.17%, remaining positive but indicating some reduction in profitability compared to the previous year.

Asset Turnover

The asset turnover ratio shows a general increasing trend from 2019 to 2022. Starting at 0.19 in 2019, it rose steadily to 0.25 in 2020, then sharply increased to 0.69 in 2021, and further to 0.76 in 2022. This suggests an improving efficiency in using assets to generate sales over these years. However, in 2023, the ratio declines to 0.47, indicating a reduction in asset utilization efficiency compared to 2022, though it remains above the earlier years' levels.

Return on Assets (ROA)

The return on assets mirrors the pattern seen in profit margin and asset turnover. ROA was negative and deteriorated from -22.04% in 2019 to -24.15% in 2020, reflecting increasing inefficiency or losses relative to asset base. In 2021, ROA improved significantly to -2.64%, almost breaking even. A strong positive return of 33.43% was recorded in 2022, indicating high profitability and effective asset use. This value decreased to 9.4% in 2023, implying reduced but still positive returns on asset investment.

Tax Burden

The Tax Burden ratio is only available for the years 2022 and 2023, showing a decline from 1.79 to 0.85. This indicates that the company’s effective tax burden relative to pre-tax income decreased significantly in that period, which may suggest either higher tax rates or decreased tax benefits.

Interest Burden

The Interest Burden ratio remains stable with a slight decrease from 0.98 in 2022 to 0.96 in 2023. This stability suggests the company maintained a consistent level of interest expenses relative to earnings before interest and taxes during these years.

EBIT Margin

The EBIT margin showed a remarkable improvement from very negative values in 2019 (-116.72%) and 2020 (-95.01%) towards near breakeven in 2021 (-3.26%), and then positive margins in 2022 (25.06%) and 2023 (24.81%). This trend indicates a significant turnaround in operational profitability, with the company moving from heavy losses to sustainable profitability within five years.

Asset Turnover

The Asset Turnover ratio increased substantially from 0.19 in 2019 to a peak of 0.76 in 2022, then declined to 0.47 in 2023. The growth represents improved efficiency in using assets to generate sales until 2022, followed by a reduction in efficiency in 2023. The drop in 2023 may suggest increasing asset base or declining sales relative to assets.

Return on Assets (ROA)

ROA shows a negative trajectory initially, with -22.04% in 2019 and -24.15% in 2020, reflecting unprofitable operations. A notable improvement occurred by 2021 (-2.64%), turning strongly positive in 2022 (33.43%), before decreasing to 9.4% in 2023. This pattern confirms the company’s recovery and ability to generate returns from its assets, despite some moderation in profitability in the latest year.

Tax Burden

The tax burden ratio is only available for the last two periods, showing a significant decrease from 1.79 in 2022 to 0.85 in 2023. This indicates a reduced tax impact on pre-tax income during the most recent year.

Interest Burden

The interest burden remains relatively stable over the two available periods, with a slight improvement from 0.98 in 2022 to 0.96 in 2023. This suggests consistent interest expense management relative to earnings before interest and taxes (EBIT).

EBIT Margin

There is a notable positive trend in EBIT margin over the five-year span. Initially, the company experienced significant negative EBIT margins, starting at -116.72% in 2019 and improving gradually to -3.26% in 2021. The EBIT margin turned positive in 2022 at 25.06%, maintaining a similar level of 24.81% in 2023. This reflects a substantial improvement in operating profitability and operational efficiency.

Net Profit Margin

The net profit margin follows a similar trajectory to EBIT margin but with more volatility. It was highly negative in the early years, from -119.06% in 2019 and improving to -3.85% in 2021. The company achieved a very strong positive net profit margin of 44.10% in 2022 but then decreased to 20.17% in 2023. Despite the decline in the most recent year, the margin remains significantly better than the negative margins recorded previously, indicating overall improved profitability with some recent contraction.