Steel Dynamics Inc. (NASDAQ:STLD)

The financial data over the five-year period reveals several fluctuating trends in key performance indicators.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates considerable volatility throughout the years. It increased substantially from approximately $755 million in 2017 to roughly $1.42 billion in 2018. This was followed by a decline to about $827 million in 2019 and a further decrease to around $696 million in 2020. A significant surge occurred in 2021, with NOPAT reaching approximately $3.61 billion, marking the highest value in the observed timeframe.

Cost of Capital

The cost of capital remained relatively stable, fluctuating within a narrow range between 14.16% and 16.54%. It decreased gradually from 16.54% in 2017 to a low of 14.16% in 2019, then increased slightly in subsequent years, ending at 16.12% in 2021. This suggests a relatively consistent risk and capital pricing environment across the period.

Invested Capital

Invested capital showed a steady upward trend, growing from about $5.96 billion in 2017 to $8.55 billion in 2021. The increments year-over-year indicate ongoing investment and capital deployment, with the most notable increase occurring between 2020 and 2021.

Economic Profit

Economic profit reflected notable variability. It was negative in most years, with a loss of approximately $231 million in 2017, improving to a positive $393 million in 2018, then slipping into negative territory again in 2019 and 2020 with losses of $124 million and $314 million respectively. The year 2021 showed a remarkable recovery, producing a substantial economic profit of $2.23 billion, indicating value creation well above the cost of capital during that year.

Overall, while the company's invested capital consistently increased, profitability as measured by NOPAT and economic profit exhibited significant fluctuation, highlighting variability in operational performance and value generation. The sharp improvement in 2021, with both NOPAT and economic profit reaching their peak levels, suggests a strong recovery or exceptional operating conditions during that year. The relatively stable cost of capital implies that changes in economic profit are primarily driven by operational results rather than shifts in financing costs.

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 under review highlights variations in several key performance indicators over a five-year period.

Economic Profit

The economic profit figures demonstrate considerable volatility throughout the period. Initially, there was a significant negative economic profit in 2017 recorded at -231,164 thousand US dollars, followed by a positive turn in 2018 reaching 392,934 thousand US dollars. However, this improvement was not sustained, as 2019 and 2020 again reflected negative economic profits of -124,527 and -313,746 thousand US dollars respectively. In 2021, a notable positive surge occurred, with economic profit rising sharply to 2,233,464 thousand US dollars, indicating a strong recovery and improved economic value generation during that year.

Invested Capital

Invested capital shows a consistent upward trend across all years, increasing from 5,964,900 thousand US dollars in 2017 to 8,550,168 thousand US dollars in 2021. The growth appears steady but somewhat moderate until 2021, when the invested capital saw a more marked increase, suggesting increased investment or capital deployment in that final year.

Economic Spread Ratio

The economic spread ratio, which measures the return on invested capital relative to cost, exhibits considerable fluctuation. It started at a negative -3.88% in 2017, improving to a positive 6.14% in 2018. The ratio again dropped into negative territory in 2019 and 2020 with values of -1.85% and -4.63% respectively, reflecting periods of returns below cost of capital. In 2021, there was a significant improvement to 26.12%, aligning with the sharp rise in economic profit, which could indicate enhanced operational efficiency or better market conditions.

Overall, the data indicates periods of instability and underperformance from 2017 to 2020, followed by a pronounced recovery in 2021 with substantial gains in economic profit and economic spread ratio. The consistent increase in invested capital suggests ongoing investments, which may have contributed to the eventual positive turnaround demonstrated in the final year observed.

The financial data reveals notable fluctuations and marked improvements over the five-year period ending in 2021.

Net Sales

Net sales exhibited a generally upward trajectory, increasing from approximately 9.5 billion US dollars in 2017 to over 18.4 billion US dollars in 2021. The growth was uneven, with a dip observed in 2020 when sales decreased to roughly 9.6 billion US dollars from previous levels, likely reflecting external pressures or market conditions during that year. However, the recovery in 2021 was significant, showing an almost doubling of sales compared to 2020.

Economic Profit

The economic profit showed significant volatility across the years. It started at a loss of approximately 231 million US dollars in 2017, turned positive in 2018 with a profit close to 393 million US dollars, then reverted back to losses in the subsequent two years (2019 and 2020) with negative values of about 125 million and 314 million US dollars respectively. In 2021, there was a dramatic turnaround, with economic profit surging to approximately 2.23 billion US dollars, indicating a strong recovery and improved profitability.

Economic Profit Margin

The economic profit margin mirrored the trend in economic profit, moving from a negative margin of -2.42% in 2017 to a positive margin of 3.32% in 2018. The margin then declined back into negative territory in 2019 and further in 2020, reaching -3.27%. In 2021, the margin showed a substantial increase to 12.13%, reflecting a highly efficient period of profit generation relative to net sales.

Overall, the data indicates a period of initial instability and decline in economic profit and margins, despite steady growth in net sales until 2019. The sharp recovery in 2021, with significant improvement in both economic profit and margin alongside increased sales, suggests operational efficiencies or favorable market conditions that substantially enhanced profitability in the final period analyzed.