Walgreens Boots Alliance Inc. (NASDAQ:WBA)

The financial data over the six-year period reflects several noteworthy trends related to profitability, invested capital, and economic profit of the company.

Net Operating Profit After Taxes (NOPAT)

The NOPAT increased significantly from 2014 through 2015, rising from $3,086 million to $5,501 million. Following this peak in 2015, NOPAT experienced a moderate decline in 2016 to $4,855 million, a recovery in 2017 to $5,246 million, and then further growth in 2018 to $5,934 million. However, there was a slight decrease in 2019 to $5,719 million. Overall, the company demonstrated a strong upward trend in operating profitability despite some fluctuations.

Cost of Capital

The cost of capital shows a gradual and consistent decline over the period. Beginning at 9.75% in 2014, it increased slightly to 10.16% in 2015, then decreased steadily year-over-year down to 8.75% in 2019. This downward trend suggests improving capital cost efficiency or more favorable financing conditions.

Invested Capital

Invested capital rose substantially from $55,001 million in 2014 to a peak of $85,356 million in 2016. After reaching this high, it decreased to $76,485 million in 2017, and remained relatively stable around the $76,000-$77,000 million range through 2019. The increase to 2016 followed by a decline and stabilization indicates an initial phase of capital investment or acquisition activity, followed by consolidation or divestment.

Economic Profit

Throughout the period, economic profit remained negative, indicating that the company did not generate returns exceeding its cost of capital. Although economic losses deepened from -$2,275 million in 2014 to a low of -$3,562 million in 2016, the company made consistent progress in reducing economic losses each subsequent year, improving to -$1,056 million in 2019. This suggests improved operational efficiency or better utilization of capital, though full value creation had not been achieved by the end of the period.

In summary, the company showed an overall increase in NOPAT alongside a reduction in cost of capital, reflecting improved profitability and financing conditions. Invested capital initially surged then stabilized, while economic profit, despite remaining negative, showed a clear trend toward narrowing losses. Together, these trends indicate progress toward enhanced financial performance, though challenges in generating positive economic profit persist.

Net earnings attributable to Walgreens Boots Alliance, Inc.

The net earnings exhibit volatility over the six-year period. Starting at 1,932 million USD in 2014, there is a significant increase to 4,220 million USD in 2015. This level is mostly sustained through 2016 and 2017, with values of 4,173 and 4,078 million USD respectively. In 2018, net earnings peak at 5,024 million USD, marking the highest point in the period analyzed. However, a decline occurs in 2019, where earnings fall to 3,982 million USD, indicating a downward shift after the 2018 peak.

Net operating profit after taxes (NOPAT)

The NOPAT shows an overall upward trend with some fluctuations. Beginning at 3,086 million USD in 2014, it rises sharply to 5,501 million USD in 2015. After this peak, it dips to 4,855 million USD in 2016, before increasing again in 2017 and 2018 to 5,246 and 5,934 million USD respectively. The highest NOPAT value is recorded in 2018. In 2019, NOPAT slightly decreases to 5,719 million USD but remains close to the peak level, indicating relatively stable operating profitability in recent years compared to net earnings.

Income Tax Provision

The income tax provision exhibited a general downward trend from 2014 to 2019. Beginning at $1,526 million in 2014, the figure decreased steadily through subsequent years, reaching $588 million in 2019. Notably, the most significant decline occurred between 2017 and 2019.

Cash Operating Taxes

Cash operating taxes remained relatively stable between 2014 and 2018, fluctuating within a narrow range from $1,667 million to $1,856 million. However, in 2019, there was a sharp decrease to $831 million, which represents a substantial reduction compared to the previous years.

Overall Observations

Both income tax provision and cash operating taxes showed significant declines by 2019 compared to earlier periods. While income tax provision steadily decreased over the years, cash operating taxes were stable for several years before dropping markedly in the last year observed. These trends may reflect changes in tax policies, operational adjustments, or shifts in taxable income and cash tax payments.

The financial data reveals several notable trends concerning the company's capital structure and invested capital over the six-year period ending in 2019.

Total reported debt & leases

This figure shows an overall increasing trend from 31,909 million USD in 2014 to 43,464 million USD in 2019, with a peak at 46,508 million USD in 2016. After reaching this peak, there is a decline in 2017 to 39,129 million USD, followed by a gradual increase again through 2018 and 2019. This pattern suggests a significant increase in leveraging activities up to 2016, some deleveraging or repayment in 2017, and subsequent additional borrowings or lease liabilities through 2019.

Total shareholders’ equity

Shareholders' equity exhibits a declining trend over the period. Starting at 20,457 million USD in 2014, the equity rose sharply to 30,861 million USD in 2015 but then continuously decreased each year thereafter to 23,512 million USD by 2019. This reduction over time indicates a depletion of equity capital, which could be attributed to factors such as sustained net losses, dividend distributions exceeding net income, share repurchases, or other equity-reducing activities.

Invested capital

The invested capital closely aligns with the combined effect of debt and equity, representing the total capital used in operations. It increased substantially from 55,001 million USD in 2014 to a peak of 85,356 million USD in 2016. Following this peak, invested capital decreased to 76,485 million USD in 2017 and remained relatively stable, with a slight increase, reaching 77,429 million USD by 2019. This behavior suggests expansion or acquisition activity up to 2016, followed by a period of consolidation or capital optimization in subsequent years.

In summary, the company experienced considerable growth in debt financing and invested capital until 2016, accompanied by an initial rise and then a steady decline in shareholders' equity. The data implies a strategic shift post-2016, characterized by deleveraging and stabilization of invested capital, while equity erosion continued, highlighting potential risks related to capital structure and financial sustainability.

Economic Profit

The economic profit shows a consistent negative value over the six-year period, indicating that the company was not generating a return exceeding its cost of capital in any of these years. Initially, the negative economic profit deepened from -2275 million USD in 2014 to a low point of -3562 million USD in 2016. Following this, a recovery trend is observed as losses progressively diminish, reaching -1056 million USD by 2019. This suggests an improvement in profitability or a reduction in cost pressures after 2016.

Invested Capital

The invested capital experienced significant growth from 2014 to 2016, increasing from 55001 million USD to 85356 million USD. Afterwards, a slight decline is noticeable in 2017, dropping to 76485 million USD, followed by relative stability around the mid- to high-77000 million USD range through 2019. This pattern indicates a substantial capital expansion phase up to 2016, then a period of consolidation or possibly capital reallocation in subsequent years.

Economic Spread Ratio

The economic spread ratio, which reflects the difference between the return on invested capital and the company's cost of capital, remained negative throughout the period. Despite this, there is a clear upward trend, moving from -4.14% in 2014 to -1.36% in 2019. The steady improvement signals that the company has been narrowing the gap between returns and costs, improving operational efficiency or capital allocation effectiveness over time.

Overall Analysis

The data indicates a challenging financial environment over these years with persistent negative economic profit and economic spread ratio values. However, improvements from 2016 onwards in both profit losses and economic spread ratio suggest a positive shift in financial performance. The initial capital increase followed by stabilization may reflect strategic investments followed by a focus on optimizing the use of capital. Taken together, these trends reveal a company gradually moving towards enhanced economic viability and value creation, though it has not yet achieved positive economic profit by 2019.

Sales

Sales exhibited a consistent upward trend over the six-year period analyzed, increasing from $76,392 million in 2014 to $136,866 million in 2019. This growth reflects a substantial expansion in revenue, with particularly notable increments between 2014 and 2015, and a steady increase in subsequent years.

Economic Profit

Economic profit remained negative throughout the entire period, indicating that the company did not generate returns above its cost of capital. However, there was a clear improvement over time, with the economic profit loss decreasing from -$2,275 million in 2014 to -$1,056 million in 2019. This trend suggests enhanced operational efficiency or profit margins reducing the economic loss each year.

Economic Profit Margin

The economic profit margin, expressed as a percentage, was consistently negative but showed a gradual improvement. Starting at -2.98% in 2014, it improved to -0.77% by 2019. This decline in negative margin aligns with the reduction in economic profit losses, indicating that the company’s economic profitability relative to sales is moving closer to breakeven.

Overall Analysis

The data reveals a pattern of strong sales growth accompanied by a steady reduction in economic losses and negative profit margins. Despite the ongoing negative economic profit, the trends suggest progress towards profitability on an economic value basis, reflecting possible operational improvements or strategic initiatives aimed at increasing value generation. Monitoring whether this trajectory continues beyond the last observed period would be crucial for assessing future economic viability.