Amphenol Corp. (NYSE:APH)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a consistent upward trend from 2019 through 2022, increasing from approximately $1.28 billion to over $2 billion. However, in 2023, there is a slight decline, with NOPAT decreasing to around $2 billion from the previous year's peak.

Cost of Capital

The cost of capital gradually increased each year, starting at 16.14% in 2019 and rising to 16.9% by 2023. This steady increase suggests a rising expense of financing or required return expectations.

Invested Capital

Invested capital has consistently expanded over the period under review, growing from about $9 billion in 2019 to approximately $13.75 billion in 2023. The most notable growth occurred between 2020 and 2022, demonstrating continued asset or capital investment.

Economic Profit

Economic profit remained negative throughout the observed years, indicating that returns did not exceed the cost of capital. The deficit deepened from 2019 to 2021, worsening from around -$180 million to over -$322 million. In 2022, there was a significant improvement, reducing the loss to approximately -$81 million, but this was followed by a reversal in 2023 with economic profit deteriorating again to around -$314 million.

The financial data reveals a generally positive trend in profitability over the five-year period from 2019 to 2023, with some fluctuations in specific measures.

Net Income Attributable to Amphenol Corporation

This metric shows a consistent increase from 2019 to 2023, starting at 1,155,000 thousand US dollars in 2019 and rising to 1,928,000 thousand US dollars in 2023. The most significant jump occurred between 2020 and 2021, where net income increased by approximately 32.2%, from 1,203,400 to 1,590,800 thousand US dollars. Growth continued through 2022, reaching 1,902,300 thousand US dollars, before showing a more modest increase of about 1.3% into 2023.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a similar upward trend, rising from 1,277,245 thousand US dollars in 2019 to a peak of 2,040,201 thousand US dollars in 2022. This represents an overall increase of nearly 60%. There is a steady year-over-year improvement, with the largest increase again visible from 2021 to 2022. However, in 2023, there is a slight decline of approximately 1.5%, decreasing to 2,010,042 thousand US dollars. Despite this small reduction, the 2023 figure remains significantly higher than in the early years.

Overall, the data indicates strong growth in profitability, with both net income and NOPAT more than doubling during the examined timeframe. The minor dip in NOPAT in 2023 suggests a potential plateau or emerging challenges affecting operating profit, though net income continues to rise slightly. This pattern suggests effective operational performance and profitability growth over the longer term, with a need to monitor recent subtle downturns in operating profit closely.

The provision for income taxes and cash operating taxes for the analyzed periods reveal notable trends in tax-related expenses.

Provision for income taxes

There was a decrease from 331,900 thousand USD in 2019 to 313,300 thousand USD in 2020, indicating a reduction in estimated tax liabilities. In 2021, this figure sharply increased to 409,100 thousand USD, followed by a further rise to 550,600 thousand USD in 2022. However, in 2023, a slight decline to 509,300 thousand USD was observed, suggesting some relief in tax provisions compared to the previous year but still significantly higher than pre-pandemic levels.

Cash operating taxes

Cash operating taxes also decreased from 342,736 thousand USD in 2019 to 307,985 thousand USD in 2020, mirroring the provision trend and likely reflecting the impact of external economic factors. Beginning in 2021, cash taxes increased substantially to 464,115 thousand USD and continued to increase through 2022 and 2023, reaching 583,929 thousand USD and 599,691 thousand USD respectively. This steady increase indicates an upward pressure on actual tax payments despite the slight reduction in provisions in 2023.

Overall, the data shows a downward shift in both tax provisions and cash taxes during 2020, possibly due to extraordinary circumstances affecting taxable income. However, from 2021 onwards, both measures display a pronounced upward trend, highlighting a recovery or growth phase characterized by higher taxable earnings and increased cash tax outflows. The divergence in 2023, where cash taxes slightly rise while provisions fall, may suggest adjustments in expected future tax liabilities or timing differences in tax payments.

Total reported debt & leases

The total reported debt and leases exhibited an overall upward trend from 2019 through 2021, increasing from approximately $3.81 billion to $5.05 billion. This was followed by a decline in the subsequent two years, lowering the figure to about $4.64 billion by 2023. The initial rise may indicate increased leverage or financing activities, while the subsequent decrease suggests debt reduction or repayment strategies.

Stockholders’ equity attributable to Amphenol Corporation

Stockholders' equity showed consistent growth throughout the examined period, rising from roughly $4.53 billion in 2019 to $8.35 billion in 2023. This steady increase points to strengthening financial stability, possibly driven by retained earnings, profitable operations, or issuance of equity, thereby enhancing the company's net worth.

Invested capital

Invested capital demonstrated a continuous increase over the five years, expanding from approximately $9.03 billion to $13.75 billion. The upward trend reflects ongoing investments in assets, acquisitions, or capital expenditures supporting the company’s growth and operational capacity. The growth rate in invested capital generally outpaced that of debt, indicating a rising equity contribution.

Economic Profit

The economic profit exhibited a fluctuating negative trend over the observed period. Initially, it decreased from -180,011 thousand US$ in 2019 to -322,496 thousand US$ in 2021, indicating a worsening economic loss. In 2022, there was a notable improvement with the economic loss reducing significantly to -80,889 thousand US$. However, this improvement was not sustained, as the economic profit declined again to -314,003 thousand US$ in 2023.

Invested Capital

The invested capital demonstrated a consistent upward trajectory throughout the period. It increased steadily from 9,029,400 thousand US$ at the end of 2019 to 13,752,400 thousand US$ by the end of 2023. This represents a substantial growth in invested capital, indicating ongoing investment and expansion activities.

Economic Spread Ratio

The economic spread ratio was negative for all years recorded, reflecting the company's inability to generate returns exceeding its cost of capital. It deteriorated from -1.99% in 2019 to a low of -2.85% in 2020, suggesting increased inefficiencies or higher costs relative to returns. While there was a slight improvement in 2022 to -0.63%, this was followed by a regression to -2.28% in 2023, indicating persistent challenges in generating positive economic returns.

Overall Analysis

Despite steady growth in invested capital, the company consistently recorded negative economic profit and economic spread ratios, indicating that the returns generated were insufficient to cover the cost of capital. The temporary improvement in economic profit and spread in 2022 suggests possible operational efficiencies or one-off factors that year, but the reversion in 2023 points to ongoing challenges. The increasing invested capital combined with persistent negative economic profit may warrant further investigation into capital allocation efficiency and cost management strategies.

Economic Profit

The economic profit figures exhibit significant fluctuations over the observed periods. Starting at a negative value of approximately -180 million US dollars in 2019, the loss deepened in 2020 and 2021, reaching a peak deficit near -322 million US dollars. A notable improvement occurred in 2022, with the loss substantially decreasing to around -81 million US dollars. However, this positive trend reversed in 2023, returning to a larger deficit exceeding -314 million US dollars.

Net Sales

Net sales demonstrate a consistent upward trend from 2019 through 2022. Sales increased from approximately 8.2 billion US dollars in 2019 to a peak near 12.6 billion US dollars in 2022. In 2023, sales slightly declined, closing just below 12.6 billion US dollars. This indicates a period of growth followed by a marginal reduction in sales volume or value.

Economic Profit Margin

The economic profit margin, expressed as a percentage, follows a pattern similar to economic profit. It starts at a negative 2.19% in 2019 and declines further to -3.32% in 2020. It slightly recovers to -2.97% in 2021, then improves more substantially to -0.64% in 2022. However, the margin declines again to -2.5% in 2023. These fluctuations suggest varying efficiency or profitability conditions across the years, with a notable improvement in 2022 but persistent negative margins throughout the period.

Summary

Overall, the financial data reveals that despite an increase in net sales over the majority of the period, the company consistently operated at an economic loss. The considerable improvement in economic profit and margin in 2022 is a positive indication but was not sustained into 2023. The data suggests challenges in converting sales growth into economic profitability, highlighting potential issues in cost control, capital efficiency, or other operational factors affecting bottom-line performance.