Activision Blizzard Inc. (NASDAQ:ATVI)

Return on Assets (ROA)

The Return on Assets metric exhibited a general upward trend from early 2019 through mid-2021, peaking around June and September 2021 with values slightly above 11%. After this peak, the ROA showed a continuous decline through 2022, reaching its lowest point in December 2022 at approximately 5.53%. Early 2023 indicates a modest recovery, with ROA rising again to around 7.59% by June 2023.

Financial Leverage

Financial leverage ratios demonstrated relative stability throughout the observed period, fluctuating narrowly between 1.36 and 1.55. There was a slight downward trend from early 2019 into late 2022, with the ratio gradually decreasing from about 1.55 to near 1.36. A minor increase was noted in the first half of 2023, bringing the leverage ratio to approximately 1.37.

Return on Equity (ROE)

Return on Equity followed a pattern similar to that of ROA but with higher percentage values, consistently ranging between roughly 7.86% and 16.01%. ROE peaked in mid-2021 above 16%, indicating strong profitability relative to equity during that period. Subsequently, a downward trend occurred through 2022, with ROE declining below 9% near the end of that year. Early 2023 figures show signs of recovery, with ROE increasing to over 10% by mid-year.

Summary Insights

The data reveals that profitability, as measured by ROA and ROE, improved steadily until mid-2021 before experiencing a notable downturn throughout 2022. This decline could suggest operational challenges or external pressures impacting asset efficiency and shareholder returns. Financial leverage remained relatively stable, with a slight decrease over time, potentially indicating a cautious approach toward debt usage or capital structure adjustments. The modest uptick in both ROA and ROE in early 2023 may reflect initial signs of financial improvement or strategic adjustments by management.

Net Profit Margin

The net profit margin exhibited a positive trend from early 2019 to the end of 2021, increasing from approximately 23.9% to a peak above 30.6%. This indicates improved efficiency in converting revenue into profit during this period. However, starting in 2022, the margin noticeably declined, dropping to around 20.1% by the end of that year, before showing a modest recovery in early 2023 reaching roughly 24.9%. This recent downward trend may indicate rising costs, pricing pressures, or other operational challenges affecting profitability.

Asset Turnover

The asset turnover ratio remained relatively stable around 0.4 in 2019, suggesting consistent efficiency in utilizing assets to generate sales. Beginning in 2020, the ratio experienced a gradual decline, falling from 0.35 at the end of 2020 to a low near 0.27 by late 2022. Slight improvement was observed in early 2023, with the ratio increasing again to about 0.31. The decreasing trend through late 2022 reflects reduced asset efficiency, potentially due to asset growth outpacing revenue, or diminished sales relative to asset base.

Financial Leverage

Financial leverage ratios hovered between 1.36 and 1.55 across the entire period, indicating a moderately leveraged capital structure. A mild decreasing trend occurred from mid-2019 through late 2022, moving from about 1.55 to near 1.36, suggesting a modest reduction in reliance on debt or liabilities relative to equity. Early 2023 showed stabilization around 1.37, implying consistency in the company's capital structure after the prior slight reductions.

Return on Equity (ROE)

ROE started at 15.18% in early 2019 but declined steadily throughout 2019 and 2020 to a low near 11.7%. There was an upward rebound in late 2020 and 2021, peaking at approximately 16%. However, from 2022 onward, ROE underwent a significant decline, reaching a low of about 7.9% before a modest recovery to around 10.4% by mid-2023. This pattern indicates fluctuating profitability relative to shareholders' equity, influenced by the interplay of declining net margins and asset turnover in recent periods.

The financial analysis over the periods under review reveals several noteworthy trends regarding profitability, efficiency, and leverage ratios.

Tax Burden

The tax burden ratio exhibited a general declining trend from early 2019 through mid-2023, moving from around 0.94 to approximately 0.84. This suggests a gradual reduction in the proportion of earnings paid as taxes, potentially reflecting changes in tax planning, regulations, or profitability before tax.

Interest Burden

Interest burden remained largely stable at a perfect 1.00 ratio from 2019 until early 2021, indicating negligible interest expenses relative to earnings. However, a slight decline is observed from 2021 onwards, reaching about 0.94 by early 2023, signifying a modest increase in interest expenses or debt costs during this period.

EBIT Margin

The EBIT margin showed an overall increasing trend from 2019 through 2021, growing from approximately 25.5% to nearly 36%. This indicates improving operating profitability, possibly due to enhanced revenue growth or cost efficiencies. However, starting from 2022, the margin declined significantly, dropping to around 24.6% by the end of 2022, followed by a recovery to near 31% by mid-2023, suggesting volatility in operating performance during this timeframe.

Asset Turnover

Asset turnover displayed a gradual decrease over the entire period, from roughly 0.41 in early 2019 to 0.30-0.31 by mid-2023. This indicates diminishing efficiency in generating revenues from assets, which might reflect asset base growth outpacing revenue growth or operational challenges in asset utilization.

Financial Leverage

Financial leverage ratios fluctuated within a narrow range, mostly between 1.36 and 1.55, with peaks in late 2019 and early 2021, and a slight decline towards mid-2023. The stability suggests consistent use of debt relative to equity, with only minor adjustments to capital structure during the periods analyzed.

Return on Equity (ROE)

Return on equity experienced some volatility, starting at about 15% in early 2019, declining to a low near 7.9% by late 2022, and then showing signs of recovery to around 10.4% by mid-2023. The decrease in ROE coincided with decreases in EBIT margin and asset turnover, reflecting the interconnected impact of operating performance and efficiency on shareholder returns.

Overall, the company demonstrated enhanced operating margins and profitability through 2021, followed by a downturn in efficiency and returns subsequently. The steady decline in asset turnover and a slight increase in interest expenses may have exerted downward pressure on overall profitability and ROE in recent periods, despite relatively stable financial leverage. The partial rebound in EBIT margin and ROE by mid-2023 indicates some recovery in operating conditions.

Net Profit Margin

The net profit margin shows a generally positive trend from early 2019 through 2021, increasing from approximately 23.9% in Q1 2019 to a peak above 30% by the end of 2021. However, starting in 2022, there is a noticeable decline in this margin, dropping to about 20.1% by Q4 2022. In 2023, a mild recovery is observed, with margins rising again to around 24.87% by mid-year. This pattern suggests increased profitability through 2021, followed by a period of reduced profitability and partial recovery in recent quarters.

Asset Turnover

The asset turnover ratio demonstrates a declining trend over the analyzed periods. It begins at approximately 0.41 in early 2019 and gradually decreases to around 0.27 by the end of 2022. A slight recovery to near 0.31 is seen in mid-2023, but overall the ratio reflects a diminished efficiency in using assets to generate revenue. This downtrend may indicate either a growing asset base that is not being fully utilized or slowing revenue growth relative to assets.

Return on Assets (ROA)

The return on assets fluctuates but generally reflects a rise until 2021, reaching levels above 11%. Post-2021, there is a marked decline in ROA, descending to 5.53% by Q4 2022. The most recent figures in 2023 show a modest improvement, with ROA moving upward to approximately 7.59%. This decrease in ROA parallels the trends in net profit margin and asset turnover, suggesting a combined effect of lower profitability and asset utilization during the period following 2021, with some recent signs of recovery.

The financial performance over the observed periods demonstrates varying trends across key profitability and efficiency metrics. The overall tax burden ratio declined gradually, indicating a modest improvement in the effective tax rate experienced by the company over time.

Tax Burden

The tax burden ratio decreased from 0.94 in early 2019 to approximately 0.84 by mid-2023, suggesting a slight reduction in tax expenses relative to pre-tax income.

Interest Burden

The interest burden remained largely stable and close to 1.0 throughout most periods, reflecting minimal impact from interest expenses on earnings. A minor declining trend is noted starting around mid-2022, indicating a slight increase in interest costs relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin exhibited an overall growth trajectory from about 25.5% in early 2019 to a peak of roughly 36% by the end of 2021. However, this was followed by a noticeable decline in 2022, reaching a low point near 24.6% by the fourth quarter of that year, before partially recovering towards mid-2023.

Asset Turnover

The asset turnover ratio demonstrated a downward trend throughout the period, with values reducing from around 0.41 in early 2019 to about 0.30 by the middle of 2023. This suggests decreasing revenue generated per unit of asset, possibly indicating diminishing operational efficiency or increased asset base without proportional revenue growth.

Return on Assets (ROA)

ROA initially declined from approximately 9.8% in early 2019 to approximately 5.5% by the end of 2022, reflecting lower profitability relative to total assets. Nonetheless, a slight recovery is observed in early 2023, rising towards 7.6%, which may indicate improved profitability or asset utilization during this period.

In summary, while profitability margins such as EBIT margin showed significant improvement through 2020 and 2021 before encountering a decline, the efficiency with which assets are utilized to generate revenue weakened steadily. The decline in ROA aligns with the reduced asset turnover, though modest profitability improvements in early 2023 suggest a partial turnaround. The tax and interest burdens remain relatively stable, with minor improvements in tax efficiency over time and a slight increase in interest costs recently.

Tax Burden Ratio

The tax burden ratio exhibited a gradual decline from 0.94 in the first quarter of 2019 to 0.84 by the second quarter of 2023. This indicates a slight decrease in the proportion of earnings paid as taxes over the period, with some fluctuations but an overall downward trend.

Interest Burden Ratio

The interest burden ratio remained stable at 1 throughout 2019 to 2021, implying negligible interest expenses relative to earnings during these years. Starting from early 2022, a minor downward movement occurred, reaching 0.96 by mid-2023, suggesting a slight increase in interest expenses relative to operating income in recent quarters.

EBIT Margin

The EBIT margin showed a rising trend from 25.5% in Q1 2019 to a peak of 35.94% in Q4 2021. Thereafter, it declined to 24.6% by Q4 2022 but rebounded somewhat to 30.84% by Q2 2023. This pattern indicates improved operating profitability through 2021, followed by some pressure on earnings before interest and taxes, and a partial recovery in 2023.

Net Profit Margin

Net profit margin increased steadily from 23.91% in early 2019 to a high of 30.66% in the last quarter of 2021. Following this peak, a downward trend emerged, dropping to 20.1% by Q4 2022. The margin rose again moderately to 24.87% in mid-2023. This reflects an overall cycle of strong profitability growth until 2021, followed by a contraction and then some improvement in recent quarters.

Summary

The company experienced enhanced profitability from 2019 through 2021, evidenced by increasing EBIT and net profit margins. However, starting in late 2021 and continuing through 2022, both margins faced declines before a modest recovery in 2023. The slight increase in interest burden and gradual decrease in tax burden over time provide additional context to these profit fluctuations. Overall, the data suggests a period of robust financial performance followed by challenges impacting margins, with early signs of stabilization.