Steel Dynamics Inc. (NASDAQ:STLD)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows significant fluctuations over the five-year period, beginning at approximately 755 million and nearly doubling to over 1.42 billion in the following year. However, this upward trend did not sustain, with NOPAT dropping to approximately 827 million and further declining to around 696 million in the next two years. A remarkable recovery is observed in the final year, with NOPAT reaching over 3.6 billion, representing a substantial increase compared to all previous years.

Cost of Capital

The cost of capital remained relatively stable over the period, fluctuating between approximately 14.4% and 16.9%. The cost decreased slightly from nearly 16.9% in the first year to a low near 14.4% in the third year before rising again, peaking at approximately 16.44% in the final year. This indicates a generally consistent but slightly increasing cost burden associated with invested capital.

Invested Capital

Invested capital shows a steady increase throughout the observed period. Starting at roughly 5.96 billion, it gradually increased each year to reach about 8.55 billion in the final year. This steady growth reflects a continuous expansion or reinvestment in the company’s operational capacity or assets over the five years.

Economic Profit

Economic profit exhibits substantial volatility, starting with a negative figure of approximately -251 million in the first year. In the second year, it shifted to a positive 373 million, indicating value creation beyond the cost of capital. Subsequently, economic profit declined into negative territory for two consecutive years, with the lowest point at about -333 million. In the last year, there was a strong turnaround to a significant positive economic profit of more than 2.2 billion, signaling exceptional value generation relative to the invested capital cost.

Overall Observations

Across the period, the data reveals cyclical performance in profitability and economic value creation, with a notable positive shift in the final year. Despite steady growth in invested capital, the company faced challenges maintaining consistent profit growth in earlier years. The final year’s marked improvement in both NOPAT and economic profit suggests a successful operational or strategic change that considerably enhanced financial performance. The cost of capital remained relatively steady, implying stable external financial conditions or risk profile. The interplay between fluctuating profits and stable capital cost affected economic profit outcomes, which ultimately recovered strongly to signify effective capital utilization in the latest period.

Net income attributable to Steel Dynamics, Inc.

The net income shows a volatile trend over the period analyzed. It increased significantly from 812,741 thousand USD in 2017 to a peak of 1,258,379 thousand USD in 2018. However, this was followed by a sharp decline to 671,103 thousand USD in 2019 and a further decrease to 550,822 thousand USD in 2020. In 2021, net income experienced a remarkable surge, reaching 3,214,066 thousand USD, the highest level in the five-year span.

Net operating profit after taxes (NOPAT)

The NOPAT values exhibit a similar pattern to net income, indicating operational profitability dynamics. Starting at 755,373 thousand USD in 2017, NOPAT rose substantially to 1,420,457 thousand USD in 2018. Subsequently, it experienced a decline, reaching 827,375 thousand USD in 2019 and decreasing slightly to 696,079 thousand USD in 2020. In 2021, NOPAT showed a significant increase to 3,611,424 thousand USD, surpassing prior years and indicating improved operational efficiency or favorable business conditions.

Insights

Both net income and NOPAT demonstrate a pattern of considerable increase in 2018, followed by a decline over the next two years, and then a substantial recovery in 2021. The pronounced increases in 2021 suggest that the company may have benefited from external or internal factors that significantly enhanced profitability. However, the volatility in prior years highlights potential operational challenges or market fluctuations impacting earnings. The alignment between net income and NOPAT trends suggests that both operational performance and overall profitability were similarly affected throughout the period.

Income tax expense

The income tax expense exhibited significant fluctuation over the five-year period. Starting at approximately $129 million in 2017, it sharply increased to nearly $364 million in 2018. This was followed by a marked reduction to about $197 million in 2019 and further declined to approximately $135 million in 2020. However, in 2021, there was a dramatic spike to over $962 million, representing the highest value in the observed timeframe.

Cash operating taxes

Cash operating taxes showed a different pattern compared to the income tax expense. Initially, there was a moderate rise from roughly $317 million in 2017 to $332 million in 2018. This was succeeded by a substantial decrease to about $176 million in 2019, continuing downward to $110 million in 2020. In 2021, cash operating taxes reversed the downward trend, surging significantly to around $656 million, though still below the 2017 and 2018 levels.

Comparison and analysis

Both income tax expense and cash operating taxes experienced fluctuations with a notable peak in 2021. Income tax expense showed more volatility with its lowest value in 2017 and highest in 2021, while cash operating taxes maintained a relatively higher baseline in the earlier years before a marked decline and subsequent increase in 2021. The considerable rise in both metrics in 2021 might indicate higher taxable income or changes in tax policy or company financial structure. The differing trajectories from 2017 to 2020 between the two measures suggest variations in timing or recognition of tax-related cash flows versus accrued tax expenses.

Total reported debt & leases

The total reported debt and leases show a generally increasing trend over the analyzed period. Starting at approximately 2.43 billion USD in 2017, the figure rose steadily each year up to around 3.21 billion USD by the end of 2021. This indicates a growing leverage or financing through debt and lease obligations over time.

Total Steel Dynamics, Inc. equity

Equity values exhibit consistent growth throughout the five-year span. Beginning at approximately 3.35 billion USD in 2017, equity increased to about 6.30 billion USD by 2021, with a notable acceleration between 2020 and 2021. This substantial rise in equity suggests significant retained earnings, capital infusions, or revaluation impacts that strengthened the company’s equity base.

Invested capital

Invested capital experienced steady growth from 5.96 billion USD in 2017 to 8.55 billion USD in 2021. The increase is somewhat consistent year over year, with a marked jump in the final year analyzed. This growth reflects an expansion in the total capital allocated in the business, combining both debt and equity financing sources, which supports the company’s operational capacity and potential for value creation.

Overall trend and insights

The data reveals a balanced expansion financed through both higher liabilities and substantially increased equity, leading to larger invested capital over the five years. The proportionally higher increase in equity compared to debt may indicate a strategic emphasis on strengthening the financial position and reducing financial risk. The rising invested capital underscores ongoing investments in operational assets or business growth initiatives. Such trends typically reflect robust financial health and an upward trajectory in the company’s scale and capital structure sophistication.

The financial data reveals significant volatility in the economic profit of the company over the analyzed period. Initially, there was a substantial economic loss in 2017, followed by a positive turnaround in 2018. However, this improvement was not sustained, as losses reoccurred in the subsequent two years. A notable recovery occurred in 2021 with a sharp increase in economic profit, reaching a peak that surpasses all prior periods.

Invested capital shows a consistent upward trend across all years. The incremental increases are relatively steady, with a more pronounced rise noted in the final year, indicating growing investment in the business base.

The economic spread ratio, which reflects the profitability relative to invested capital, mirrors the fluctuations in economic profit. It starts with a negative ratio, turns positive in 2018, falls back into negative territory for the next two years, and then experiences a remarkable surge in 2021. This suggests that the company's ability to generate returns above its cost of capital has improved significantly by the end of the period.

Economic Profit

Exhibited significant volatility with two major negative periods and two positive peaks, the latter being especially strong at the end of the timeline.

Invested Capital

Increased steadily throughout the period, with a sharper rise in the last year.

Economic Spread Ratio

Fluctuated from negative to positive and back, ending with a substantial positive increase, indicating improved profitability relative to invested capital.

Overall, the data indicates a pattern of recovery and growth following periods of economic loss, culminating in strong economic performance in the most recent year analyzed. The increase in invested capital alongside the improved economic spread ratio suggests effective utilization of capital starting from 2021 onwards.

The financial data exhibits notable fluctuations in both economic profit and sales figures over the five-year period. Understanding these variations provides insight into the company's operational and profitability dynamics.

Economic Profit

The economic profit demonstrates high volatility throughout the timeframe. It starts with a negative figure of -250,632 thousand US dollars in 2017, then improves substantially to a positive 373,067 thousand US dollars in 2018. However, this gain is not sustained, as the company experiences declines with negative economic profits again in 2019 (-142,466 thousand) and 2020 (-333,485 thousand). A significant turnaround occurs in 2021, with economic profit reaching a strong positive value of 2,206,109 thousand US dollars, the highest in the observed period.

Net Sales

Net sales follow a generally upward trend, albeit with some variability. Starting at approximately 9.54 billion US dollars in 2017, sales increase to about 11.82 billion in 2018 before declining slightly to 10.46 billion in 2019 and further to 9.60 billion in 2020. A pronounced surge is observed in 2021, with net sales reaching 18.41 billion US dollars, representing the peak over the five years.

Economic Profit Margin

The economic profit margin aligns closely with the economic profit pattern. It records negative values in 2017 (-2.63%), 2019 (-1.36%), and 2020 (-3.47%), indicating periods where returns did not cover the cost of capital. Positive margins occur in 2018 (3.16%) and rise sharply in 2021 to 11.98%, reflecting improved profitability and efficient use of resources during these years. The 2021 margin notably surpasses previous figures, highlighting a year of exceptional economic value generation.

Overall Insights

The data suggests that while sales revenue generally increased over the years, profitability as measured by economic profit showed irregular patterns, including significant losses in multiple years. The remarkable recovery in economic profit and margin in 2021, coupled with substantial sales growth, indicates an operational or strategic improvement leading to enhanced value creation. The variances in economic profit and margin could be attributed to changes in cost management, pricing strategies, or external market conditions influencing performance across the period.