Western Digital Corp. (NASDAQ:WDC)

The analyzed financial indicators reveal notable trends and fluctuations over the considered periods.

Return on Assets (ROA)

Initially, ROA demonstrated positive values, peaking at 3.01% in late 2018, followed by a significant decline into negative territory reaching as low as -5.86% in October 2019. This decline reflected a period of deteriorating asset profitability. A recovery phase occurred from early 2020 to late 2021, with ROA improving steadily and reaching a high of 7.66% by December 2021. However, this improvement was not sustained, as ROA decreased sharply thereafter, turning negative again by March 2023 and continuing to decline to -9.26% by the end of 2023. Overall, ROA exhibits volatility with cycles of recovery and decline, ending in a notable negative position.

Financial Leverage

Financial leverage ratios showed a gradual increase from 2.52 in late 2018 to a peak of 2.76 in early 2020. Following this, a steady reduction trend was observed until mid-2022, where leverage decreased to approximately 2.07 by early 2023. In the subsequent quarters, leverage experienced moderate increases, ending around 2.23 by the end of 2023. This pattern indicates cautious deleveraging during the recovery phase and a slight return to higher leverage levels towards the year-end.

Return on Equity (ROE)

ROE values closely align with ROA trends but amplified due to leverage effects. The metric rose to 7.71% in late 2018, followed by a substantial dip into negative territory, bottoming at -16.11% in October 2019. The period thereafter saw gradual recovery, with ROE peaking at 16.58% by December 2021, representing the highest performance during the timeframe. Similar to ROA, ROE declined sharply starting in early 2022, turning negative by late 2022 and reaching a deep negative value of -22% in December 2023. These shifts indicate substantial volatility in the company’s equity returns, reflecting both operating performance and financial structure changes over the analyzed periods.

In summary, the data illustrate cycles of weakening and strengthening profitability, significant fluctuations in leverage, and corresponding variability in equity returns. The recent downward trends in both ROA and ROE, combined with modestly rising leverage, suggest challenges affecting asset and equity profitability towards the end of the reported periods.

The analysis of the quarterly financial ratios reveals distinct trends in profitability, efficiency, leverage, and overall shareholder returns over the examined periods.

Net Profit Margin (%)

The net profit margin exhibits significant fluctuation throughout the quarters. Initially, the margin rose from 2.46% to a peak of 4.34%, before entering a period of decline reaching negative values, including a trough near -9.89%. A recovery phase is evident as the margin ascends to a high of 10.52%. Subsequently, there is a marked downturn, with the margin falling sharply into negative territory, ending the latest periods near -20.07%. This pattern suggests volatility in profitability, with phases of both strong and weak earnings control relative to revenue.

Asset Turnover (ratio)

The asset turnover ratio shows a gradual decline over time, starting from 0.71 and generally trending downward to 0.46 by the last quarter. Minor improvements occur mid-period, reaching up to 0.75. This declining trend indicates decreasing efficiency in using assets to generate revenue, which may reflect changes in asset base or sales performance dynamics.

Financial Leverage (ratio)

Financial leverage ratios remain relatively stable, beginning around 2.52 and experiencing minor fluctuations within a narrow range from approximately 2.17 to 2.76. Slight downward movement is noted in the middle quarters, but a modest uptick occurs toward the most recent quarters. This stability implies consistent use of debt relative to equity over the timeframe, with no dramatic shifts in capital structure.

Return on Equity (ROE) (%)

The return on equity closely mirrors net profit margin trends but with amplified changes. It rises initially from 4.44% to peaks above 16%, then plummets to negative lows exceeding -22%. The ROE demonstrates periods of strong shareholder returns interspersed with episodes of losses, reflecting variability in profitability combined with leverage effects. The decline at the end of the sequence underlines deteriorating overall returns to equity holders.

In summary, the data shows a cyclical pattern in profitability measures, with substantial volatility in both net profit margin and ROE. Asset efficiency deteriorates steadily, while financial leverage remains stable, suggesting that financial structure did not materially compound the fluctuations in return. The recent quarters indicate challenges in maintaining profitability and asset utilization, highlighting potential areas for operational or strategic improvement.

Tax Burden

The tax burden ratio exhibits considerable variability over the observed periods. Initially positive with values around 0.26 to 0.66, it fluctuates and occasionally turns negative, particularly around early 2021 and mid-2023. From late 2020 through 2022, the tax burden remains relatively high and stable, mostly above 0.6, indicating a consistent tax impact on earnings during this period. The negative values in certain quarters suggest instances of tax benefits or credits affecting profitability.

Interest Burden

The interest burden ratio starts moderately high but experiences sharp declines, turning negative in mid-2019 and again around mid-2020, reflecting periods of unusual interest expense or income recognition. After these volatile periods, the ratio gradually improves and stabilizes, peaking near 0.88 in late 2021 and maintaining levels above 0.6 into early 2023. This pattern reflects fluctuations in interest expense relative to operating income with a trend toward reduced interest impact over time.

EBIT Margin

The EBIT margin shows a pronounced negative trend from late 2018 through early 2020, moving from modest positive margins down to negative figures reaching approximately -4.92%. Subsequently, it recovers progressively, achieving a peak margin above 13% in late 2021 and early 2022. However, beginning in late 2022, the margin again declines sharply, becoming negative in several recent quarters, with losses as severe as -17.53% around late 2023. This indicates distinct cycles of profitability with significant volatility, highlighting operational challenges and recovery phases.

Asset Turnover

Asset turnover gradually decreases from 0.71 in late 2018 to 0.46 by the end of 2023. This steady decline suggests a reducing efficiency in using assets to generate revenue over the period, with no indication of reversal. The sustained dip in asset turnover could imply either increased asset base without proportionate revenue growth or lower sales productivity relative to assets held.

Financial Leverage

Financial leverage starts around 2.52 and generally trends downward to approximately 2.17 by early 2022, indicating a modest reduction in reliance on debt financing relative to equity. After this low point, leverage increases slightly, reaching around 2.23 by the end of 2023. Throughout the period, financial leverage exhibits only moderate variation, suggesting relatively stable capital structure dynamics with mild shifts toward increased leverage in the most recent quarters.

Return on Equity (ROE)

ROE demonstrates significant fluctuations paralleling the EBIT margin and burden ratios. It moves from positive values near 7.7% in late 2018 to deep negative returns exceeding -16% in late 2019 and early 2020. A pronounced recovery occurs through 2021, achieving ROE peaks above 16%, before declining again into negative territory starting in late 2022, with troughs exceeding -22% by late 2023. This volatility reflects underlying earnings instability and operational cycles impacting shareholder returns over the analyzed timeframe.

Net Profit Margin

The net profit margin exhibited notable fluctuations over the observed periods. It started at a modest positive level, peaking at 4.34% before declining sharply into negative territory where it reached its lowest point around -21.34% and -20.07% in the latest quarters. A recovery phase was observed between early 2021 and early 2022, with margins improving up to a high of approximately 10.52%. However, after this peak, a steady and significant decline set in, ultimately resulting in considerable sustained negative margins by the end of the period.

Asset Turnover

Asset turnover displayed a general downward trend over the timeframe. Starting at 0.71, the ratio gradually decreased with minor fluctuations. A brief improvement was seen in early 2022, reaching a peak of around 0.75, but this was followed by a marked decline continuing to the end of the data, resulting in the lowest ratios of approximately 0.46 by the final quarter. The trend indicates a reduction in the efficiency of asset utilization to generate sales over the periods analyzed.

Return on Assets (ROA)

ROA movements closely followed the patterns observed in net profit margin, reflecting the company’s profitability relative to its asset base. Initially positive, ROA rose to its highest point around 3.01% early on, then declined sharply into negative figures, bottoming out near -10.07% and -9.26% in recent quarters. A recovery was evident between early 2021 and early 2022, paralleling the net profit margin improvement, with ROA peaking at approximately 7.66%. Following this, a downturn ensued, leading to negative returns in the latter periods.

Tax Burden

The tax burden ratio exhibited volatility over the periods, initially fluctuating between approximately 0.22 and 0.66 before data gaps appeared. From early 2021 onward, it showed an upward trend peaking near 0.91, followed by a gradual decline towards 0.61 by late 2022. The ratio briefly turned negative in early 2021 and again near the end of 2022, indicating periods of tax benefits or losses offsetting taxable income.

Interest Burden

The interest burden ratio started around 0.77 and declined over the early periods, reaching a low near -1.58, signaling interest expenses exceeding operating income at that time. Subsequently, it recovered with fluctuations, peaking close to 0.88 in early 2022, then demonstrated a slight decline to around 0.62 towards the end of 2022. Negative values in earlier periods suggest financial stress or irregular interest effects during those quarters.

EBIT Margin

The EBIT margin revealed a notable trend: beginning at a solid positive level near 12.42%, it fell sharply into negative territory during late 2019 and early 2020, reaching lows near -4.92%. Recovery commenced mid-2020, with a peak at approximately 13.25% by early 2022. However, the margin then plunged dramatically, turning negative again, culminating near -17.53% by late 2023, indicating significant operational challenges and declining profitability in recent periods.

Asset Turnover

Asset turnover showed a gradual declining trend over the entire period. Starting at 0.71, it slowly decreased with periodic minor recoveries, dropping to around 0.46 by the end of 2023. This suggests reduced efficiency in using assets to generate revenue, potentially indicating declining sales generation relative to total assets.

Return on Assets (ROA)

The ROA metric showed notable fluctuations, initially rising from 1.76% to 3.01%, before declining sharply into negative territory at nearly -5.86%. A recovery trend was observed through mid-2021 into early 2022, reaching a peak of about 7.66%. Following this, ROA declined steadily and turned negative again in late 2022, falling to approximately -10.07% by late 2023. This pattern reflects the company’s oscillating profitability relative to asset base, with periods of operational losses and reduced asset efficiency impacting returns.

The financial data reveals notable fluctuations in profitability and burden ratios over the observed periods. The following analysis highlights key trends and observations.

Tax Burden

The tax burden ratio shows considerable variability, starting at 0.26 and increasing to a peak of 0.91 between late 2021 and early 2022. There is a notable decline afterward down to negative values around mid-2023, indicating irregular tax impacts likely due to adjustments or tax benefits. Periods with missing data in 2019 and early 2020 prevent continuous trend analysis but the available data suggests increased tax efficiency in the later part of the timeline before deterioration.

Interest Burden

The interest burden ratio also exhibits volatility, initially decreasing from 0.77 in late 2018 to negative figures by mid-2019 and early 2020, potentially reflecting negative interest expenses or accounting anomalies. From late 2020 onward, the ratio improves steadily, reaching a high near 0.87 by the end of 2022, followed by a decline to 0.62 by mid-2023. This pattern suggests initial financial strain followed by improved interest cost management before signs of increasing burden reappear.

EBIT Margin

The EBIT margin reflects a clear cyclical pattern, starting at a healthy 12.42% but declining sharply through 2019 and early 2020, reaching negative values as low as -4.92%. Recovery occurs gradually from mid-2020 to a peak above 13% in late 2021 and early 2022. However, the margin deteriorates significantly starting late 2022, becoming negative again and reaching below -16% by the end of 2023. This implies periods of operational challenges interspersed with recovery phases, possibly tied to industry cycles or external economic factors.

Net Profit Margin

Net profit margin trends generally mirror the EBIT margin with a lag. Initial positive margins above 2% decrease sharply into negative territory during 2019 and 2020, reaching a trough near -9.89%. A recovery trend follows, with margins improving steadily to over 10% by late 2021 and early 2022. Thereafter, profitability declines from mid-2022 onwards, with negative margins deepening below -21% by late 2023. This indicates net profitability is highly sensitive to operational performance and possibly impacted by tax and interest components.

Overall, the data reveals a cyclical performance pattern with significant stresses during 2019–2020 and again in late 2022 through 2023. The improvement in EBIT and net margins during 2021 and early 2022 suggests a strong recovery phase. However, the subsequent deterioration in margins and burden ratios points to renewed challenges affecting both operational efficiency and financial costs.