Advanced Micro Devices Inc. (NASDAQ:AMD)

Net Operating Profit After Taxes (NOPAT)

The NOPAT increased significantly from 1,330 million US dollars in 2020 to 3,517 million US dollars in 2021. However, it experienced a sharp decline in the following years, becoming negative with -138 million US dollars in 2022 and further decreasing to -201 million US dollars in 2023. In 2024, there was a partial recovery to a positive value of 621 million US dollars.

Invested Capital

The invested capital showed a consistent upward trend from 4,364 million US dollars in 2020 to 6,195 million US dollars in 2021, followed by a substantial increase to 58,525 million US dollars in 2022. It remained relatively stable in 2023 and 2024, with values around 57,883 million and 58,227 million US dollars respectively.

Return on Invested Capital (ROIC)

ROIC rose markedly from 30.47% in 2020 to a peak of 56.77% in 2021. Afterward, it plunged to negative figures, -0.24% in 2022 and -0.35% in 2023, reflecting low or negative profitability relative to invested capital. In 2024, there was a slight improvement to 1.07%, though it remained significantly lower than the levels observed in 2020 and 2021.

Overall Analysis

The data reveals a period of strong profitability and effective capital utilization up to 2021. Subsequently, both profit and returns on capital deteriorated sharply, coinciding with a dramatic increase in invested capital by 2022. This suggests challenges in converting the expanded capital base into positive operating profit during the latter years. The partial recovery in 2024 indicates an initial improvement, though returns remain subdued compared to the earlier high-performance years.

The financial data reveals significant fluctuations in key operating and return metrics over the five-year period. There are notable trends and variances across operating profit margin, turnover of capital, effective cash tax rate, and return on invested capital, which collectively illustrate shifts in operational efficiency and profitability.

Operating Profit Margin (OPM)

The operating profit margin shows a peak in 2021 at 22.7%, followed by a sharp decline in 2022 to 5.31%, with further decrease in 2023 reaching 2.02%. However, there is a partial recovery in 2024, rising to 8.35%. This trend suggests volatility in profitability at the operating level, with the highest margin in 2021 not sustained in subsequent years.

Turnover of Capital (TO)

Turnover of capital remains relatively stable and strong in 2020 and 2021, with ratios of 2.24 and 2.65 respectively, indicating efficient use of capital. However, from 2022 onwards, there is a steep decline to around 0.4, which persists through 2023 and slightly improves to 0.44 in 2024. This decline suggests reduced efficiency in generating revenue from the invested capital during the later years.

1 – Effective Cash Tax Rate (CTR)

The metric representing one minus the effective cash tax rate exhibits considerable volatility and some negative values. It starts high at 98.24% in 2020 and slightly decreases to 94.27% in 2021, which may imply a lower effective tax burden or significant tax benefits. However, in 2022 and 2023, the values turn negative (-11.01% and -43.92%), indicating either tax credits, refunds, or other unusual tax events reducing tax payments below zero. In 2024, this value rebounds to 28.85%, suggesting a partial normalization of tax effects.

Return on Invested Capital (ROIC)

ROIC peaks dramatically in 2021 at 56.77%, illustrating highly profitable use of invested capital during that year. However, a steep fall occurs in 2022 and 2023, with slight negative returns (-0.24% and -0.35%), indicating unprofitable capital investment or operational challenges. A marginal positive return of 1.07% in 2024 suggests a modest improvement, but still significantly below earlier performance levels.

Overall, the data points to a high-performance year in 2021, characterized by strong profitability and capital efficiency, followed by a challenging period with deteriorated margins, inefficiencies, and unusual tax situations. The partial recoveries observed in 2024 indicate some stabilization but remain below the peak levels experienced earlier in the period.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT exhibited significant fluctuations over the observed periods. Starting at 1,354 million USD in 2020, it increased sharply to 3,731 million USD in 2021. However, this was followed by a pronounced decline to 1,254 million USD in 2022, further dropping to 457 million USD in 2023 before rebounding to 2,152 million USD in 2024. This volatility indicates variability in profitability before taxation, with a noteworthy recovery in the most recent year.

Net Revenue

Net revenue showed a generally increasing trend across the periods. Revenue nearly doubled from 9,763 million USD in 2020 to 16,434 million USD in 2021, and then increased further to 23,601 million USD in 2022. There was a slight reduction to 22,680 million USD in 2023, but revenue rose again to 25,785 million USD in 2024. Overall, the revenue growth trajectory reflects expansion, with a minor dip in 2023 that may warrant further investigation.

Operating Profit Margin (OPM)

The operating profit margin revealed considerable variability with an overall downward trend after 2021. The margin peaked at 22.7% in 2021 following 13.87% in 2020. However, it declined sharply to 5.31% in 2022 and continued decreasing to 2.02% in 2023. A recovery occurred in 2024 with the margin rising to 8.35%, although it remained below the earlier peak. This pattern suggests increased pressure on operating profitability despite growing or fluctuating revenues.

The financial data from the periods ending in late December of 2020 through 2024 demonstrates significant fluctuations across key metrics, including net revenue, invested capital, and capital turnover ratio.

Net Revenue

The net revenue shows a consistent and strong upward trend over the reported years. Starting at approximately $9.76 billion in 2020, revenue increased sharply to about $16.43 billion in 2021, followed by continued growth up to $23.60 billion in 2022. Although there was a slight dip to $22.68 billion in 2023, the revenue rebounded to its highest level in 2024, reaching approximately $25.79 billion. This overall pattern reflects robust sales growth despite a minor contraction in 2023.

Invested Capital

The invested capital exhibits a dramatic increase between 2021 and 2022, rising from $6.20 billion in 2021 to an extraordinary figure of $58.53 billion in 2022. This elevated level of capital investment remained relatively stable through 2023 and 2024, slightly decreasing to $57.88 billion in 2023 and then increasing marginally to $58.23 billion in 2024. This surge in invested capital in 2022 suggests a significant expansion or acquisition that substantially increased the asset base during that period.

Turnover of Capital (TO)

The capital turnover ratio, calculated as net revenue divided by invested capital, exhibits a stark decline starting in 2022. From relatively healthy levels of 2.24 and 2.65 in 2020 and 2021 respectively, the ratio fell precipitously to 0.40 in 2022, and remained low at 0.39 in 2023, with a slight improvement to 0.44 in 2024. This reduction signals that the efficiency with which the company is utilizing its invested capital to generate revenue has drastically decreased, likely due to the large increase in invested capital outpacing revenue growth during these later years.

In summary, the data indicates strong revenue growth accompanied by a substantial rise in invested capital beginning in 2022. However, the efficiency in using capital to generate revenue has declined considerably, suggesting the company has undertaken significant capital-intensive initiatives that have not yet fully translated into proportional revenue increases. Monitoring the capital turnover ratio in future periods will be important to assess whether efficiency improves as these investments begin to yield returns.

Cash Operating Taxes

The cash operating taxes exhibited a significant increase from US$24 million in 2020 to US$214 million in 2021. There was a steep rise again to US$1392 million in 2022, followed by a notable decline to US$658 million in 2023. However, in 2024, the cash operating taxes surged to US$1531 million, indicating considerable volatility and overall growth in tax payments over the five-year period.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes initially rose sharply from US$1,354 million in 2020 to a peak of US$3,731 million in 2021. This was followed by a steep decline to US$1,254 million in 2022 and a further drop to US$457 million in 2023. In 2024, the NOPBT rebounded significantly to US$2,152 million. The trend reflects considerable fluctuations with high profitability in 2021 and a recovery phase evident in 2024 after two years of reduced profits.

Effective Cash Tax Rate (CTR)

The effective cash tax rate showed considerable volatility and an overall upward trend. Starting at a low rate of 1.76% in 2020, it increased to 5.73% in 2021. The tax rate then surged dramatically to 111.01% in 2022 and further to 143.92% in 2023, which may suggest that cash taxes exceeded pre-tax profits during this period. In 2024, the rate decreased substantially to 71.15%, indicating some normalization but remaining at a relatively high level compared to earlier years.

Summary

Over the five-year period, there is evidence of significant volatility in operational profitability and cash taxes. The fluctuations in net operating profit before taxes were mirrored by large swings in cash operating taxes and effective cash tax rates. Particularly notable are the unusually high effective cash tax rates in 2022 and 2023, indicating instances where cash tax payments greatly exceeded profits. Despite these fluctuations, the company ended the period with higher cash taxes and improved net operating profits compared to 2023, signaling a recovering financial position but with ongoing tax-related challenges.