Analysis of Investments
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- Income Statement
- Balance Sheet: Assets
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Analysis of Reportable Segments
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Price to FCFE (P/FCFE)
- Dividend Discount Model (DDM)
- Aggregate Accruals
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Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
Align Technology Inc., adjustment to net income
US$ in thousands
| 12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|---|
| Net income (as reported) | ||||||
| Add: Change in unrealized gains (losses) on investments, net of tax | ||||||
| Net income (adjusted) |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data reflects the reported and investment-adjusted net income of the company over a five-year period ending in 2022. Both reported and adjusted net income values exhibit strong growth initially, followed by a notable decline in the final years.
- Reported Net Income
- Starting at approximately $400 million in 2018, reported net income showed a steady increase, reaching around $443 million in 2019. A significant spike occurred in 2020, with net income approximately quadrupling to nearly $1.78 billion. However, this peak was not sustained, as income dropped sharply to $772 million in 2021 and further decreased to $361 million in 2022.
- Adjusted Net Income
- The adjusted net income closely parallels the reported figures throughout the period, indicating that adjustments for investment effects did not materially alter the net income trends. Starting at roughly $400.5 million in 2018, adjusted income increased modestly to $443 million in 2019, then surged to $1.78 billion in 2020. Similar to reported net income, adjusted net income declined to around $772 million in 2021 and further to $358 million in 2022.
- Trend Analysis and Insights
- The data reveals a pronounced growth phase culminating in 2020, suggesting that factors during that year significantly boosted profitability. The near-identical patterns between reported and adjusted net income imply that investment-related adjustments did not significantly affect the results, confirming the core operational performance trends. The sharp declines in 2021 and 2022 may reflect intrinsic business challenges, changes in market conditions, or extraordinary items not detailed in the data. Such fluctuations warrant further examination to identify underlying causes and to assess sustainability of profitability.
Adjusted Profitability Ratios: Mark to Market Available-for-sale Securities (Summary)
Align Technology Inc., adjusted profitability ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Net Profit Margin Trends
- The net profit margin, both reported and adjusted, exhibited notable volatility over the five-year period. Initially, the margin was approximately 20.35% in 2018, experiencing a slight decline to around 18.4% in 2019. In 2020, there was a remarkable surge to nearly 72%, representing an exceptional increase. However, this elevated margin was not sustained, with a reduction to about 19.5% in 2021 and a further decline to roughly 9.6% in 2022. The adjusted figures closely mirror the reported margins, indicating consistency between reported and investment-adjusted data.
- Return on Equity (ROE) Patterns
- ROE followed a pattern similar to that of the profit margin. Starting at approximately 32% in 2018 and slightly increasing to nearly 33% in 2019, the ROE spiked significantly to about 55% in 2020. Subsequently, it dropped sharply to near 21% in 2021 and continued to decline to around 10% in 2022. The adjusted ROE values are nearly identical to reported ROE, underscoring minimal difference between reported and adjusted results.
- Return on Assets (ROA) Development
- ROA also showed considerable fluctuation, commencing at 19.5% in 2018 and declining modestly to 17.7% in 2019. A substantial increase to approximately 37% occurred in 2020, followed by a considerable decrease to near 13% in 2021 and further reduction to roughly 6% in 2022. The adjusted ROA figures align almost exactly with the reported data, indicating stability in the adjustment methodology.
- Overall Insights
- The data reveal a significant peak in profitability and efficiency ratios in 2020, which stands out as an anomalously high year compared to other periods. This spike was followed by marked declines in 2021 and 2022, suggesting either a one-off event boosted 2020 results or subsequent challenges impacted profitability and returns. The consistent alignment between reported and adjusted figures suggests reliability in the financial adjustments made for investment analysis purposes. However, the sharp contraction in margins, ROE, and ROA after 2020 points to deteriorating financial performance in the latest periods covered by the data.
Align Technology Inc., Profitability Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Net profit margin = 100 × Net income ÷ Net revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net revenues
= 100 × ÷ =
- Net Income Trends
- The reported net income experienced a substantial increase from 2018 to 2020, rising from approximately $400 million to nearly $1.78 billion. This peak was followed by a sharp decline in 2021 to about $772 million, and a further decrease in 2022 to $361 million. The adjusted net income values closely mirror this pattern, indicating consistency between reported and adjusted figures.
- Profit Margin Trends
- The reported net profit margin displayed a significant spike in 2020, reaching 71.84%, a stark contrast to the margins of 20.35% in 2018 and 18.4% in 2019. Following this peak, the margin reverted to levels more comparable to prior years, showing 19.53% in 2021 and declining further to 9.68% in 2022. The adjusted net profit margin values align almost identically with the reported margins throughout the period, suggesting minimal adjustments impact profit margin figures.
- Overall Observations
- The company experienced a remarkable financial performance in 2020, reflected by both net income and profit margins. However, this performance appears to be an outlier compared to other years, as indicated by the reversion to lower margins and income levels in subsequent years. The decline in 2022 suggests either increased costs, reduced revenues, or other factors negatively affecting profitability. The close alignment between reported and adjusted figures suggests reported earnings provide a reliable indicator of the company’s profit trends without significant adjustments.
Adjusted Return on Equity (ROE)
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × ÷ =
The financial data reveals significant fluctuations in both net income and return on equity (ROE) over the analyzed period. Reported net income shows an initial moderate increase from 400,235 thousand US dollars in 2018 to 442,776 thousand US dollars in 2019. This is followed by a remarkable surge in 2020, reaching 1,775,888 thousand US dollars, indicating a substantial improvement in profitability. However, this peak is not sustained as net income declines sharply in 2021 to 772,020 thousand US dollars, and further decreases in 2022 to 361,573 thousand US dollars, suggesting a challenging period with reduced earnings.
Adjusted net income follows an almost identical pattern to reported net income throughout the years, with values closely aligned. This consistency suggests that the adjustments made to net income do not significantly alter the overall profit trend and that reported figures largely reflect the underlying economic reality.
Return on equity exhibits a similar trajectory. Reported ROE rises from 31.94% in 2018 to 32.89% in 2019 and then experiences a pronounced spike to 54.92% in 2020, indicating exceptionally high profitability relative to shareholders’ equity during that year. Subsequently, ROE declines substantially to 21.31% in 2021 and further drops to 10.04% in 2022, echoing the downward trend observed in net income. Adjusted ROE mirrors the reported ROE closely, indicating that the adjustments to net income similarly do not materially affect this profitability measure.
Overall, the data highlights a peak in financial performance in 2020, with both net income and ROE reaching their highest levels. The subsequent two years show a notable decline, with profitability metrics dropping to levels comparable to or lower than those observed at the beginning of the period. The close alignment between reported and adjusted figures throughout the timeframe underlines the reliability and consistency of the financial reporting.
Adjusted Return on Assets (ROA)
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × ÷ =
- Net Income Trends
- The reported net income exhibited an overall increasing trend from 2018 through 2020, rising from approximately $400 million in 2018 to a peak of around $1.78 billion in 2020. However, this was followed by a notable decline in the subsequent years, with net income decreasing to $772 million in 2021 and further dropping to approximately $362 million in 2022.
- The adjusted net income mirrored the pattern of reported net income closely, showing a steady increase to nearly $1.78 billion in 2020 before a considerable decrease to roughly $771 million in 2021 and then to $358 million in 2022. The narrow differences between reported and adjusted figures indicate minimal impact from the adjustments on net income.
- Return on Assets (ROA) Analysis
- The reported ROA showed a strong upward movement from 19.5% in 2018 to a peak of 36.77% in 2020, suggesting improved efficiency in asset utilization during this period. Post-2020, ROA declined significantly to 12.99% in 2021 and further to 6.08% in 2022, indicating diminished returns relative to the asset base.
- Similarly, the adjusted ROA followed the same trajectory as the reported ROA, with values closely aligned throughout the period. The adjusted ROA increased from 19.51% in 2018 to 36.77% in 2020, then declined steadily to 12.98% in 2021, followed by 6.03% in 2022. This consistency suggests limited effect from adjustments on asset efficiency metrics.
- Overall Insights
- The financial data reveal a period of strong profitability and asset efficiency improvement through 2020, followed by a marked downturn in both net income and ROA in the following two years. The close correlation between reported and adjusted figures indicates that non-operational factors had limited influence on profitability and asset returns. The steep decline after 2020 may warrant further investigation into underlying causes such as market conditions, operational challenges, or other external factors impacting performance.