Devon Energy Corp. (NYSE:DVN)

Return on Assets (ROA)

The return on assets experienced significant fluctuations over the analyzed periods. Starting at a strong positive value of 15.66% in 2018, it declined sharply to -2.59% in 2019 and further decreased to -27.04% in 2020, indicating deteriorating asset profitability during these years. Subsequently, there was a substantial recovery with ROA rising to 13.38% in 2021 and further improving to 25.36% in 2022. This recovery suggests enhanced efficiency in asset utilization toward the end of the period.

Financial Leverage

Financial leverage showed varying trends throughout the examined years. It increased from 2.13 in 2018 to a peak of 3.44 in 2020, indicating a rising reliance on debt or other liabilities relative to equity. Following this peak, the ratio declined to 2.27 in 2021 and further to 2.12 in 2022, reflecting a reduction in leverage and possibly a more conservative capital structure in the later years.

Return on Equity (ROE)

Return on equity mirrored the pattern of ROA with pronounced volatility. It started at a favorable 33.36% in 2018 but turned negative to -6.12% in 2019 and drastically fell to -92.89% in 2020, highlighting significant losses impacting shareholders' returns during this difficult period. A strong rebound followed in 2021 with ROE reaching 30.37%, and this positive trend continued with a substantial increase to 53.86% in 2022, signifying improved profitability and value creation for equity holders.

The analysis of the financial ratios over the five-year period reveals significant fluctuations in the company's profitability, efficiency, and financial structure.

Net Profit Margin

The net profit margin experienced considerable volatility. Starting from a robust level of 28.54% in 2018, it declined sharply to a negative margin of -5.71% in 2019, followed by a further steep drop to -55.51% in 2020. This indicates a period of substantial losses in 2019 and 2020. Subsequently, there was a strong recovery in profitability, with the margin rising to 23.05% in 2021 and improving further to 31.38% in 2022.

Asset Turnover

The asset turnover ratio showed a generally upward trend over the period. It began at 0.55 in 2018, slightly decreased to 0.45 in 2019, then modestly increased to 0.49 in 2020. A more significant improvement occurred in 2021 at 0.58, continuing to 0.81 in 2022. This trend suggests increasing efficiency in generating sales from assets, with notable acceleration in the last two years.

Financial Leverage

Financial leverage ratios indicate the degree of the company's debt financing. It was relatively stable at 2.13 in 2018, rising moderately to 2.36 in 2019, followed by a sharp increase to 3.44 in 2020, which may have contributed to the high net losses that year. This was then followed by a decrease to 2.27 in 2021 and further down to 2.12 in 2022, suggesting a reduction in reliance on debt and potentially a strengthening balance sheet position in the more recent years.

Return on Equity (ROE)

ROE followed a pattern similar to net profit margin, indicating direct impacts of profitability and leverage on shareholders' returns. Starting strong at 33.36% in 2018, ROE turned negative in 2019 at -6.12%, with a significant decline in 2020 to -92.89%, reflecting substantial losses and possibly high leverage effects. Recovery ensued in 2021 with ROE rising to 30.37%, and a remarkable improvement in 2022 reaching 53.86%, highlighting a robust increase in value generated for equity holders.

Overall, the data demonstrates a turbulent period between 2019 and 2020, characterized by substantial losses and increased financial leverage. The turnaround from 2021 onwards is marked by improved profitability, operational efficiency, reduced leverage, and enhanced returns to shareholders, indicating successful recovery and strengthening financial health.

The financial indicators demonstrate a mixed trend across the examined periods, reflecting fluctuations in profitability, efficiency, and leverage.

Tax Burden

Tax Burden shows a high ratio in 2018 at 0.95, missing data for 2019, and then reaching its peak at 0.98 in 2020 before declining to 0.78 by 2022. This indicates a generally high proportion of earnings retained after tax in the earlier years, followed by a decrease, which might suggest rising tax obligations or changes in taxable income in the later periods.

Interest Burden

Interest Burden declines from 0.92 in 2018 to 0.88 in 2021 before improving to 0.95 in 2022. This pattern suggests an initial increase in interest expenses relative to EBIT, with some recovery in 2022, indicating improved management or reduction in interest costs towards the end of the period.

EBIT Margin

The EBIT Margin reveals significant volatility, starting at a strong 32.77% in 2018, plunging into negative territory in 2019 (-2.01%) and declining further in 2020 (-61.47%). A recovery is apparent in 2021 and 2022, reaching 42.38%, which surpasses the initial level in 2018, demonstrating a marked turnaround in operational profitability after the challenging years.

Asset Turnover

Asset Turnover gradually declines from 0.55 in 2018 to 0.45 in 2019 but then shows a consistent upward trend to 0.81 in 2022. This improvement reflects enhanced efficiency in using assets to generate sales over time, particularly notable in the last two years.

Financial Leverage

The Financial Leverage ratio increases from 2.13 in 2018 to a peak of 3.44 in 2020, before descending back to 2.12 in 2022. This trend indicates a period of intensified reliance on debt or other liabilities to finance assets around 2020, followed by deleveraging, which could correspond to efforts to reduce financial risk.

Return on Equity (ROE)

Return on Equity experiences extreme variability, starting at 33.36% in 2018, dropping sharply to -6.12% in 2019, and reaching a low of -92.89% in 2020. Subsequently, there is a substantial recovery to 53.86% in 2022, exceeding the initial level. Such fluctuations suggest significant operational or market challenges in 2019 and 2020, with a strong rebound in shareholder returns in recent years.

Overall, the data reflects a period of financial distress or operational difficulty around 2019 and 2020, marked by negative margins and returns, increased leverage, and lower asset efficiency. However, this is followed by significant recovery and improvement in profitability, efficiency, and risk management from 2021 onwards, culminating in stronger financial performance and favorable returns to equity holders by 2022.

The analysis of the annual financial ratios indicates significant fluctuations in key performance metrics over the five-year period.

Net Profit Margin (%)

There is considerable volatility in profitability measured by net profit margin. It starts relatively high at 28.54% in 2018 but sharply declines to negative territory in 2019 (-5.71%) and plummets further to -55.51% in 2020, indicating substantial losses. The metric recovers strongly in 2021 to 23.05% and improves even further to 31.38% in 2022, surpassing the initial 2018 level. This pattern suggests an adverse impact likely linked to external or operational factors in 2019 and 2020 followed by a robust financial recovery.

Asset Turnover (ratio)

The asset turnover ratio exhibits a trend of gradual improvement across the period. Starting at 0.55 in 2018, it dips slightly to 0.45 in 2019, then modestly recovers to 0.49 in 2020. From 2020 forward, a clear upward trend is observed: 0.58 in 2021 and a notable increase to 0.81 in 2022. This indicates increasing efficiency in utilizing assets to generate revenues, with the most pronounced improvement occurring in the last two years.

Return on Assets (ROA) (%)

The ROA follows a trajectory similar to the net profit margin, reflecting overall profitability and asset utilization. It begins at a positive 15.66% in 2018, turns negative at -2.59% in 2019, and drops significantly to -27.04% in 2020. Subsequently, there is a recovery to 13.38% in 2021 and a further increase to 25.36% in 2022, indicating restored and improved returns on the company’s asset base by the end of the period.

In summary, the financial ratios reflect a period of considerable financial distress and reduced efficiency in 2019 and 2020, followed by a strong recovery in 2021 and 2022. The improvement in asset turnover and profitability metrics in the latter years suggests enhanced operational effectiveness and profitability stabilization.

The financial data reveals several notable trends over the five-year period. The Tax Burden ratio shows strong values in 2018 and 2021, nearing unity, which indicates a high proportion of earnings retained after tax. However, there is a decrease in 2022 to 0.78, suggesting a larger tax expense relative to earnings in that year. Data for 2019 and 2020 is not available, limiting analysis for those periods.

The Interest Burden ratio remained relatively stable where available, with a slight decline to 0.88 in 2021 before improving again to 0.95 in 2022. This suggests variability in the impact of interest expenses on earnings before taxes, with some improvement in managing interest costs in the most recent year.

The EBIT Margin exhibits substantial volatility. It started strong at 32.77% in 2018, then declined sharply to negative values in 2019 (-2.01%) and 2020 (-61.47%). This indicates significant operational challenges or impairments during those years. A recovery is observed in 2021 with a positive margin of 26.76%, which further improves to 42.38% in 2022, signaling robust operational performance in the latter years.

Asset Turnover shows a gradual improvement over the period. It decreased slightly from 0.55 in 2018 to 0.45 in 2019 but then rose to 0.49 in 2020 and continued increasing to 0.58 and 0.81 in 2021 and 2022 respectively. The increasing trend in asset turnover reflects a growing efficiency in generating revenue from the company's asset base.

Return on Assets (ROA) mirrors the volatility seen in EBIT Margin. It began at 15.66% in 2018, fell into negative territory in 2019 (-2.59%) and significantly worsened in 2020 (-27.04%). Subsequent recovery is notable in 2021 (13.38%) and strengthened further in 2022 (25.36%). This trend aligns with improvements in operational profitability and asset utilization over the last two years.

Summary of trends:

The periods of 2019 and 2020 were marked by operational difficulties, reflected by negative EBIT margins and ROA, likely caused by adverse conditions impacting profitability.

Recovery in 2021 and 2022 is evident across multiple metrics, including EBIT Margin, ROA, and Asset Turnover, indicating a return to stronger financial health and operational efficiency.

The decreasing Tax Burden ratio in 2022 may warrant further investigation into tax-related expenses or structural changes impacting net earnings after tax.

Interest Burden showed some fluctuation but generally did not present significant deterioration, suggesting relatively stable interest-related expenses compared to operational earnings.

The financial ratios over the presented years indicate significant fluctuations in profitability and burden ratios for the company.

Tax Burden

The tax burden ratio shows slight variability, starting at 0.95 in 2018, increasing marginally to 0.98 in 2021, then decreasing notably to 0.78 in 2022. This decline in 2022 suggests a reduction in tax obligations relative to income.

Interest Burden

The interest burden ratio begins at 0.92 in 2018, declines to 0.88 in 2021, and then rises to 0.95 in 2022. This pattern indicates a minor reduction in interest costs as a proportion of earnings before interest and taxes (EBIT) around 2021, followed by an increase in 2022, approaching the earlier 2018 level.

EBIT Margin

The EBIT margin displays substantial volatility. It stood at a healthy 32.77% in 2018, then sharply dropped to negative values in 2019 (-2.01%) and more drastically in 2020 (-61.47%), indicating operational losses during these years. A recovery is observed in 2021, with the margin rising to 26.76%, and further improving substantially to 42.38% in 2022, surpassing the 2018 level.

Net Profit Margin

Similarly, the net profit margin follows a parallel trend with EBIT margin. It decreased from 28.54% in 2018 to negative levels in 2019 (-5.71%) and 2020 (-55.51%), reflecting net losses. The margin improved to 23.05% in 2021 and increased further to 31.38% in 2022, indicating a strong recovery and improved profitability.

Overall, the data reveals a period of significant operational and net losses during 2019 and 2020, followed by a marked recovery in 2021 and 2022. The improvement in EBIT and net profit margins, combined with relatively stable tax and interest burden ratios, suggests enhanced operational efficiency and profitability in the latest reported year.