Waste Management Inc. (NYSE:WM)

The data reveals several notable trends concerning profitability, capital efficiency, and economic value creation over the five-year period.

Net Operating Profit After Taxes (NOPAT)

NOPAT increased from 1952 million US dollars in 2017 to a peak of 2286 million in 2018, reflecting improved operating profitability in that year. However, NOPAT then experienced a decline in the subsequent years, dropping to 2119 million in 2019 and further decreasing to 2018 million in 2020 before slightly recovering to 2064 million in 2021. This pattern indicates an initial enhancement in operational performance followed by a period of reduced profitability, possibly due to challenging business conditions or operational inefficiencies.

Cost of Capital

The cost of capital has remained relatively stable, fluctuating between approximately 10.3% and 11.1% during the period. It reached its highest point in 2018 at 11.08% and its lowest in 2020 at 10.32%. The marginal variations could reflect changes in market interest rates, risk perceptions, or capital structure adjustments, but overall the cost remained consistent without significant volatility.

Invested Capital

Invested capital showed a clear upward trajectory from 2017 through 2020, increasing from 17686 million US dollars to 23729 million US dollars. This represents a substantial growth in assets deployed in the business or possibly increased working capital or capital expenditure investments. However, in 2021, invested capital decreased to 22932 million, suggesting a possible divestment, asset disposals, or capital efficiency improvements in the most recent year.

Economic Profit

Economic profit exhibited a volatile and concerning trend. Starting modestly positive at 55 million US dollars in 2017, it surged to a peak of 244 million in 2018, indicating value creation above the cost of capital. However, from 2019 onward, economic profit turned negative and persistently remained below zero, with losses of 329 million in 2019, worsening to 430 million in 2020, and holding steady near that level at 428 million in 2021. This pattern implies that despite positive accounting profits, the returns generated have failed to cover the cost of capital, thus diluting shareholder value during these years.

The financial data indicates fluctuations and trends in the profitability measures of the entity over the five-year period ending December 31, 2021.

Net Income Attributable to the Company

The net income shows a declining trend from 2017 through 2020, starting at 1,949 million US dollars in 2017, slightly decreasing to 1,925 million in 2018, followed by a more pronounced decrease to 1,670 million in 2019 and further down to 1,496 million in 2020. However, there is a rebound in 2021, with net income rising to 1,816 million, indicating a recovery after the decline in prior years.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures reveal a different pattern. Starting at 1,952 million US dollars in 2017, NOPAT increased substantially in 2018 to 2,286 million, peaking in that year. Afterward, it declined over the next two years to 2,119 million in 2019 and 2,018 million in 2020. By 2021, NOPAT experienced a slight increase to 2,064 million, indicating some stabilization or modest recovery in operating profitability after taxes.

In summary, while both net income and NOPAT exhibit declines starting around 2018 or 2019, net income shows a more significant decrease and a notable rebound by 2021, whereas NOPAT peaked earlier in 2018, followed by declines with a slight recovery by 2021. These patterns may reflect variations in non-operating income, expenses, taxes, or other adjustments impacting net income differently compared to operating profit.

The financial data over the five-year period ending December 31, 2021, shows distinct trends in both income tax expense and cash operating taxes.

Income Tax Expense

Income tax expense experienced a general increase from 2017 to 2021, with fluctuations during the intermediate years. The value rose significantly from $242 million in 2017 to $453 million in 2018. It then slightly decreased to $434 million in 2019 and further declined to $397 million in 2020. However, in 2021, there was a notable increase to $532 million, marking the highest expense in the period analyzed.

Cash Operating Taxes

Cash operating taxes demonstrated a downward trend from 2017 through 2020, followed by a sharp rise in 2021. Specifically, cash operating taxes decreased from $626 million in 2017 to $511 million in 2018 and further to $424 million in 2019. This downward trajectory continued with a reduction to $324 million in 2020. In 2021, this trend reversed dramatically as cash operating taxes surged to $689 million, surpassing all previous years in the data set.

Overall, while the income tax expense shows variability with an eventual upward movement to reach its peak in 2021, cash operating taxes reveal a more pronounced downward trend until 2020, followed by a significant increase in the last year. The contrasting movements in these two tax-related financial items in 2021 may indicate changes in tax policy application, operational performance, or other tax-related accounting factors impacting the company’s tax obligations.

The financial data reveals distinct trends in key balance sheet components over the five-year period ending December 31, 2021.

Total Reported Debt & Leases

The total reported debt and leases exhibit an overall upward trend from 2017 through 2020, increasing from approximately $9,976 million in 2017 to a peak near $14,326 million in 2020. This represents a significant increase of roughly 43% over three years. In 2021, a slight decline to $13,928 million is noted, indicating a minor reduction in indebtedness or lease obligations after reaching the high point the prior year.

Total Stockholders’ Equity

Stockholders' equity also shows a general increase over the reviewed period, rising from about $6,019 million in 2017 to a maximum of $7,452 million in 2020. This growth suggests accumulated retained earnings and possible capital contributions enhancing the company’s net asset base. However, equity decreases slightly in 2021 to $7,124 million, indicating some erosion following the peak, which could be due to net losses, dividends, or other equity-reducing activities.

Invested Capital

Invested capital follows a similar pattern to total debt and equity, with steady growth from $17,686 million in 2017 to $23,729 million in 2020. This growth, amounting to approximately 34%, reflects increased deployment of financial resources into the company's operations, likely contributing to expansion or asset acquisition. The figure slightly contracts to $22,932 million in 2021, aligning with the modest declines in both debt and equity components.

Overall, the data depicts growth in the company’s financial size and capital structure through 2020, with a slight retrenchment in debt, equity, and invested capital during 2021. This trend suggests a period of expansion followed by cautious tightening or normalization of the balance sheet in the most recent year.

The data demonstrates several notable trends in the company's financial performance over the five-year period ending December 31, 2021.

Economic Profit

Economic profit shows significant variability throughout the period. Beginning with a positive figure of US$55 million in 2017, it sharply increased to a high of US$244 million in 2018. However, from 2019 onwards, economic profit declined drastically into negative territory, with losses reported as US$329 million in 2019, US$430 million in 2020, and US$428 million in 2021. This pattern indicates a turnaround from profitability to sustained economic losses over the latter three years.

Invested Capital

The invested capital increased steadily over the period. Starting at US$17,686 million in 2017, it rose annually to reach a peak of US$23,729 million in 2020. In 2021, there is a slight decrease to US$22,932 million. Overall, the invested capital expanded by approximately 30% over the period, reflecting ongoing investment or capital commitments, with a minor retrenchment in the final year.

Economic Spread Ratio

The economic spread ratio, representing returns generated on invested capital, follows a trend closely aligned with economic profit. It started at 0.31% in 2017, improved substantially to 1.32% in 2018, but deteriorated markedly in subsequent years: -1.45% in 2019, -1.81% in 2020, and -1.87% in 2021. These negative ratios in the final three years underline the company's inability to generate returns exceeding its cost of capital, contributing to the consistent economic losses observed.

In summary, the company experienced a strong financial position and positive economic profitability up to 2018. The subsequent years reflect deteriorating performance characterized by negative economic profit and spread ratios, despite a continuous increase in invested capital. This suggests challenges in effectively utilizing capital to generate value, warranting closer scrutiny of operational efficiency, cost structure, or market conditions impacting returns in the recent period.

Adjusted Operating Revenues

The adjusted operating revenues exhibit a generally increasing trend over the observed periods. Starting at 14,495 million US dollars in 2017, revenues rose gradually to 14,933 million in 2018 and further to 15,467 million in 2019. There was a slight decline in 2020 to 15,223 million, which may be indicative of challenges faced that year. However, the revenues rebounded significantly in 2021, reaching 17,963 million, marking the highest level in the five-year span.

Economic Profit

The economic profit shows a notable downward trend with a shift from positive to negative values. In 2017, the company realized an economic profit of 55 million US dollars, which increased substantially to 244 million in 2018. However, from 2019 onwards, the economic profit turned negative with a sharp decline to -329 million in 2019, followed by a further drop to -430 million in 2020 and a slight improvement but sustained negative performance at -428 million in 2021. This transition suggests increasing costs or other factors eroding the company's economic value despite growing operating revenues.

Economic Profit Margin

The economic profit margin mirrors the trend observed in economic profit. Initially positive at 0.38% in 2017, it improved to 1.63% in 2018, indicating more efficient value generation relative to revenues. Subsequently, the margin declined sharply to -2.13% in 2019, deteriorating further to -2.82% in 2020. There was a marginal recovery to -2.38% in 2021 but the margin remained negative, underscoring ongoing challenges in achieving profitability relative to operating income during the latter years.

Overall Analysis

The financial data reflects a period of growth in operating revenues coupled with declining economic profitability. The deterioration in economic profit and margins from 2019 onwards, despite increasing revenues, points to rising costs, decreased operational efficiency, or other adverse financial influences. The company appears to face significant challenges in converting its operating earnings into value-added profit. The data suggests a need for strategic reassessment to address the negative economic returns observed during the last three years of the period.