Dollar General Corp. (NYSE:DG)

The annual financial data reveals several key trends in the company's profitability and capital efficiency over the analyzed periods.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a general upward trend from 2019 through 2023, increasing from approximately 1.98 billion to 3.66 billion US dollars. However, in the latest period (2024), there is a noticeable decline to about 2.43 billion US dollars, which represents a significant drop compared to the prior year.

Cost of Capital

The cost of capital has remained relatively stable throughout the periods, fluctuating mildly between 6.83% and 7.42%. The lowest cost of capital is reported in the latest period (6.83%), while the highest was observed in 2022 at 7.42%.

Invested Capital

The invested capital has steadily increased over the years, starting from around 18.1 billion US dollars in 2019 and rising to approximately 26.3 billion US dollars in 2024. This indicates ongoing investment or asset growth in the business base.

Economic Profit

Economic profit has shown significant growth from 2019 to 2023, rising from roughly 693 million to 1.90 billion US dollars. However, similar to NOPAT, economic profit experiences a sharp decrease in 2024, dropping to about 634 million US dollars. This decline contrasts sharply with prior growth trends.

Overall, the analysis indicates that while the company experienced consistent growth in profitability (both NOPAT and economic profit) and invested capital until 2023, there is a marked reversal in 2024 with a reduction in profits despite continued growth in invested capital and a lower cost of capital. This suggests potential challenges in generating returns on additional capital investment in the most recent period, which may warrant further investigation into operational efficiency or market conditions affecting profitability.

The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.

Net Income

Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.

Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.

The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.

Provision for Income Taxes

The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.

Cash Operating Taxes

Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.

Comparative Insights

Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.

Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.

Shareholders’ Equity

Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.

Invested Capital

Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.

Overall Analysis

The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.

Economic profit

The economic profit demonstrated an overall increasing trend from 2019 to 2023, rising from approximately 693 million USD to nearly 1.9 billion USD. However, there was a notable decline in the latest period, 2024, where economic profit fell sharply to around 634 million USD. This recent decrease represents a significant drop compared to the peak in 2023.

Invested capital

Invested capital increased steadily throughout the entire period from 2019 to 2024. It rose from about 18.1 billion USD in 2019 to over 26.3 billion USD in 2024. This consistent growth suggests ongoing investments or asset accumulation by the company over the years.

Economic spread ratio

The economic spread ratio, expressed as a percentage, generally improved from 2019 to 2023, moving from 3.83% to a high of 7.67% in 2023, indicating increasing returns relative to invested capital during this timeframe. However, in 2024, there was a pronounced decline to 2.41%, signaling a significant reduction in efficiency or profitability relative to the capital invested.

Summary and Insights

The company showed a positive trajectory in profitability and efficiency metrics from 2019 through 2023, highlighted by rising economic profit and improving economic spread despite the increasing scale of invested capital. The growth in invested capital indicates expansion or capital investment efforts. However, the most recent year presents a reversal in this positive trend with a marked decrease in economic profit and economic spread ratio, despite continued growth in invested capital. This may suggest emerging challenges in generating returns from investments or increased costs impacting profitability.

Net Sales

There is a consistent upward trend in net sales over the six-year period. Starting at approximately 25.6 billion US dollars in early 2019, net sales increased steadily each year, reaching nearly 38.7 billion US dollars by early 2024. This reflects sustained growth in revenue generation.

Economic Profit

Economic profit showed growth from 2019 through 2023, increasing from about 693 million US dollars to nearly 1.9 billion US dollars, indicating improved profitability and value creation during this period. However, in 2024, economic profit experienced a sharp decline to approximately 634 million US dollars, suggesting a significant reduction in economic value added compared to the prior year.

Economic Profit Margin

The economic profit margin followed a similar trend to economic profit, increasing from around 2.7% in 2019 to a peak of just over 5% in 2023. This indicates enhanced efficiency in generating economic profit relative to sales over five years. Nevertheless, in 2024, the margin dropped steeply to 1.64%, signaling a precipitous decrease in profitability relative to sales despite continued sales growth.

Overall Insights

The data indicate that while net sales consistently grew annually, both economic profit and economic profit margin peaked in 2023 before declining markedly in 2024. This divergence suggests that although revenue expansion continued, profitability and economic value creation faced challenges in the most recent year under review. Further investigation would be warranted to identify factors contributing to the decline in economic profit and margin despite higher sales levels.