Moderna Inc. (NASDAQ:MRNA)

The period under review demonstrates significant fluctuations in economic profit. Initial observations reveal a substantial shift from negative economic profit to positive values, followed by a return to negative figures in the most recent year. This analysis details the observed trends in net operating profit after taxes, cost of capital, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited a dramatic increase from a loss of US$605 million in 2019 to a profit of US$3,091 million in 2020. This positive trend continued with a substantial rise to US$14,737 million in 2021. However, NOPAT decreased significantly to US$3,520 million in 2022 and then experienced a considerable loss of US$5,414 million in 2023.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating between 25.40% and 26.04%. A slight downward trend is discernible, decreasing from 25.87% in 2019 to 25.40% in 2023, though the changes are minimal.

Invested Capital

Invested capital mirrored the trend in NOPAT, increasing from US$481 million in 2019 to US$4,183 million in 2020, and further to US$10,693 million in 2021. A decrease was observed in 2022, falling to US$7,126 million, followed by a further reduction to US$5,263 million in 2023.

Economic Profit

Economic profit followed a pattern closely linked to NOPAT and invested capital. It began at a loss of US$730 million in 2019, then rose to a profit of US$2,002 million in 2020. The largest profit was recorded in 2021 at US$11,983 million. Economic profit decreased to US$1,696 million in 2022 and ultimately resulted in a loss of US$6,751 million in 2023. The magnitude of the loss in 2023 is noteworthy, exceeding the initial loss recorded in 2019.

The substantial volatility in NOPAT appears to be the primary driver of the fluctuations in economic profit. While the cost of capital remained relatively constant, the significant changes in both NOPAT and invested capital had a pronounced effect on the company’s economic performance. The return to negative economic profit in 2023 suggests a potential decline in the efficiency of capital allocation or a decrease in the profitability of operations relative to the cost of capital.

The financial data reveals significant fluctuations in the company's profitability over the five-year period. The net income (loss) experienced a substantial improvement from 2019 to 2021, transitioning from negative figures in 2019 and 2020 to a strong positive net income in 2021. This peak was followed by a decline in 2022 and a return to negative net income in 2023.

Similarly, the net operating profit after taxes (NOPAT) reflects this volatility. In 2019, the NOPAT was negative but shifted to a positive value in 2020, with a remarkable increase reaching its highest point in 2021. After peaking, there was a steep decline in 2022 and further deterioration in 2023, resulting in negative NOPAT.

Net Income (Loss) Trend

From a loss of $514 million in 2019 worsening to a loss of $747 million in 2020, the company reversed its fortunes dramatically in 2021, generating a net income of $12,202 million. This profit decreased to $8,362 million in 2022 and swung back to a loss of $4,714 million in 2023.

Net Operating Profit After Taxes (NOPAT) Trend

Consistent with net income, NOPAT started negative at -$605 million in 2019, rose sharply to $3,091 million in 2020, then peaked at $14,737 million in 2021. The metric then declined to $3,520 million in 2022 and further dropped to -$5,414 million by 2023, displaying high volatility and indicating challenges in operational profitability towards the end of the period.

Overall Insight

The data demonstrates a peak in financial performance in 2021, followed by notable declines in subsequent years. The sharp swings between profit and loss suggest potential external or internal factors influencing operational efficiency and market conditions. The negative results in 2023 highlight recent financial challenges and may warrant further investigation into cost structures, revenue streams, or market dynamics.

The financial data exhibits notable fluctuations in the provision for income taxes as well as cash operating taxes over the five-year period.

Provision for (benefit from) income taxes

There is a clear upward trend from 2019 through 2022, starting with a benefit of US$ -1 million in 2019, rising to a modest provision of US$ 3 million in 2020, and then surging significantly to US$ 1,083 million in 2021 and further to US$ 1,213 million in 2022. However, in 2023, the provision decreased to US$ 772 million, indicating a partial reversal from the previous two years but still remaining at a substantially higher level than in 2019 and 2020.

Cash operating taxes

The cash operating taxes similarly show variability with a negative outflow of US$ -4 million in 2019, followed by a small positive figure of US$ 1 million in 2020. Thereafter, there is a sharp increase to US$ 1,381 million in 2021 and US$ 1,763 million in 2022, mirroring the upward trend seen in the provision for income taxes. Notably, in 2023 the cash operating taxes turn negative again at US$ -191 million, which contrasts starkly with the two previous years and suggests unusual tax-related cash flows or adjustments.

Overall, both provisions for income taxes and cash operating taxes remain low in the initial years before escalating steeply during 2021 and 2022, likely reflecting increased taxable income or changes in tax rates or rules during that period. The drop in 2023 for both measures, especially the negative cash operating taxes, may warrant further investigation as it suggests atypical tax events or benefits impacting cash flows.

The financial data over the five-year period exhibit notable fluctuations in the key metrics of total reported debt and leases, stockholders' equity, and invested capital.

Total Reported Debt & Leases

The total reported debt and leases increased consistently each year from 2019 to 2023. Starting at US$136 million in 2019, it rose sharply to US$238 million in 2020 and then accelerated to US$916 million in 2021. The upward trend continued but at a moderated pace with values reaching US$1,200 million in 2022 and US$1,243 million in 2023. This pattern suggests a notable increase in leverage, especially between 2019 and 2021, followed by a stabilization at a higher debt level.

Stockholders’ Equity

Stockholders’ equity showed a dramatic rise in 2021 after more moderate growth in the early years. Beginning at US$1,175 million in 2019, the equity more than doubled to US$2,561 million in 2020. It then surged to US$14,145 million in 2021 and continued to grow to US$19,123 million in 2022. However, in 2023, there was a significant decline to US$13,854 million. This peak followed by contraction indicates volatility in the company’s net assets, potentially reflecting market valuation changes or dividend payments.

Invested Capital

Invested capital experienced substantial volatility, showing an initial increase from US$481 million in 2019 to a peak of US$10,693 million in 2021. Following this peak, there was a sharp decline to US$7,126 million in 2022 and a further decrease to US$5,263 million in 2023. The sharp rise and subsequent decline suggest significant shifts in the company’s invested resources, which may be due to asset acquisitions or disposals, changes in working capital, or shifts in capital allocation strategies.

Overall, the data reveal a period of significant expansion in both debt and equity financing up to 2021 or 2022, followed by signs of retraction or adjustment in 2023. The increase in leverage alongside the rise in equity points to aggressive growth or investment phases, while the subsequent declines in equity and invested capital indicate possible strategic repositioning or market-related adjustments.

The economic spread ratio exhibits significant fluctuations over the observed period. Initially negative, it demonstrates substantial improvement before declining again to a negative value. This pattern closely mirrors the changes in economic profit, as expected, given the ratio’s calculation.

Economic Spread Ratio Trend

In 2019, the economic spread ratio is markedly negative at -151.74%. This indicates a substantial shortfall in returns relative to the cost of invested capital. A dramatic shift occurs in 2020, with the ratio increasing to 47.85%, signaling improved profitability and a positive spread. The ratio peaks in 2021 at 112.06%, representing a considerable outperformance of invested capital. However, this performance diminishes in 2022, with the ratio decreasing to 23.79%. Finally, the ratio returns to a negative value in 2023, registering at -128.27%, suggesting a return to underperformance relative to the cost of capital.

The economic spread ratio’s volatility suggests a sensitivity to underlying economic profit and invested capital levels. The large swings indicate potential instability in the company’s ability to consistently generate returns exceeding its cost of capital. The negative values in 2019 and 2023 are particularly noteworthy, highlighting periods where the company’s investments did not generate sufficient returns to cover their associated costs.

Relationship to Economic Profit

The economic spread ratio’s movement is directly correlated with economic profit. Years with positive and increasing economic profit (2020 and 2021) correspond with positive and increasing economic spread ratios. Conversely, years with negative economic profit (2019 and 2023) are associated with negative economic spread ratios. The magnitude of the economic profit directly influences the percentage value of the economic spread ratio.

The invested capital figures show a general increasing trend until 2022, followed by a decrease in 2023. This change in invested capital, combined with the fluctuating economic profit, contributes to the observed volatility in the economic spread ratio.

The economic profit margin exhibited significant fluctuations between 2019 and 2023. Initial values are unavailable for 2019, but a substantial increase is observed in 2020, followed by further growth in 2021, a decline in 2022, and a considerable negative shift in 2023.

Economic Profit Margin

The economic profit margin began at 49.52% in 2020, indicating that for every dollar of adjusted net product sales, approximately 49.52 cents represented economic profit. This margin expanded to 58.46% in 2021, suggesting improved efficiency in generating returns above the cost of capital. A decrease to 11.88% in 2022 signals a reduction in profitability relative to sales. The most pronounced change occurred in 2023, with the margin falling to -146.41%, indicating a substantial economic loss for each dollar of adjusted net product sales.

Economic profit itself mirrored this trend. Starting with a loss of US$730 million in 2019, it rose dramatically to a profit of US$2,002 million in 2020, peaking at US$11,983 million in 2021. A decline to US$1,696 million occurred in 2022, and a significant loss of US$6,751 million was recorded in 2023.

Relationship between Economic Profit and Adjusted Net Product Sales

Adjusted net product sales increased significantly from US$72 million in 2019 to US$4,042 million in 2020 and reached US$20,499 million in 2021. Sales decreased to US$14,278 million in 2022 and further declined to US$4,611 million in 2023. The substantial decrease in sales in 2023, coupled with the negative economic profit, likely contributed to the significantly negative economic profit margin observed in that year.

The correlation between adjusted net product sales and economic profit margin is evident. Periods of increased sales generally corresponded with higher economic profit margins, while declining sales were associated with reduced or negative margins. The magnitude of the shift in 2023 suggests a potential issue with cost control, capital efficiency, or a significant decline in demand relative to the cost of capital employed.