Amgen Inc. (NASDAQ:AMGN)

The financial data presents notable trends over the five-year span regarding profitability and capital structure ratios.

Return on Assets (ROA)

The ROA shows a declining trend from 11.54% in 2020 to 4.45% in 2024. After a moderate decrease in 2021, it slightly recovered in 2022 before decreasing significantly through 2023 and 2024. This pattern indicates reduced efficiency in asset utilization over time.

Financial Leverage

Financial leverage exhibited a substantial increase from 6.69 in 2020, peaking at 17.79 in 2022. Post-2022, leverage decreased slightly but remained high, around 15.6 in 2023 and 2024. This suggests a growing use of debt financing, substantially higher than the initial year, implying greater financial risk.

Return on Equity (ROE)

ROE followed an overall upward trajectory from 77.2% in 2020 to a peak of 178.97% in 2022, before declining to 69.59% in 2024. The peak in 2022 coincides with the highest financial leverage, suggesting leverage amplified equity returns during that period. However, the subsequent decline, despite leverage remaining elevated, indicates diminishing profitability or increased risks affecting equity returns.

In summary, while the company showed increased shareholder returns during the period with rising financial leverage, asset profitability has weakened consistently. The elevated leverage levels carry increased risk, and the reduction in ROE after the 2022 peak suggests potential challenges in sustaining high returns under this capital structure.

Net Profit Margin

The net profit margin shows a generally declining trend over the five-year period. Starting at 29.97% in 2020, it decreased to 24.25% in 2021, slightly improved to 26.42% in 2022, then dropped again to 24.96% in 2023, before a significant decline to 12.77% in 2024. This indicates a diminishing profitability relative to sales, with a notable sharp decrease in the latest year.

Asset Turnover

Asset turnover values fluctuated during the period. Initially, it was stable around 0.39-0.40 in 2020 and 2021, but declined to 0.38 in 2022 and sharply to 0.28 in 2023. It recovered slightly to 0.35 in 2024. Overall, the data suggests a decrease in efficiency in using assets to generate revenue, especially in 2023, followed by partial improvement.

Financial Leverage

Financial leverage increased significantly over the years, from 6.69 in 2020 to a peak of 17.79 in 2022. Although it decreased somewhat to 15.59 in 2023 and remained stable at 15.63 in 2024, the leverage level remains elevated compared to the initial year. This reflects a considerable increase in the use of debt relative to equity over time.

Return on Equity (ROE)

ROE showed substantial volatility, rising sharply from 77.2% in 2020 to 87.96% in 2021 and reaching an exceptional high of 178.97% in 2022. It then declined to 107.78% in 2023 and further to 69.59% in 2024. Despite the decline in recent years, ROE remains relatively high, indicating strong profitability for shareholders but also suggesting reliance on high financial leverage, as indicated by previous trends.

Tax Burden

The tax burden ratio remained relatively stable over the five-year period, fluctuating slightly between 0.86 and 0.89. This suggests consistent tax management or stable tax policies affecting the company’s net profitability.

Interest Burden

The interest burden ratio exhibited a marked decline from 0.87 in 2020 to 0.59 in 2024. This trend indicates increasing interest expenses relative to earnings before interest and taxes, suggesting a higher financial cost burden over time, potentially due to increased debt levels or higher interest rates.

EBIT Margin

The EBIT margin showed variability, with a notable dip in 2021 to 32.51% from 38.76% in 2020, followed by a recovery exceeding the initial level in 2023 at 39.87%. However, it dropped significantly to 24.24% in 2024, indicating deteriorating operating profitability in the most recent year.

Asset Turnover

Asset turnover declined from 0.39 in 2020 to a low of 0.28 in 2023, before slightly recovering to 0.35 in 2024. This pattern suggests a reduction in efficiency in using assets to generate sales during the mid-period, with some improvement more recently.

Financial Leverage

Financial leverage escalated dramatically from 6.69 in 2020 to 17.79 in 2022, remaining elevated around 15.6 thereafter. The significant increase indicates a heavier reliance on debt financing, which may have contributed to the increased interest burden observed.

Return on Equity (ROE)

ROE displayed strong growth, rising from 77.2% in 2020 to a peak of 178.97% in 2022, before declining to 69.59% in 2024. The exceptionally high ROE in 2022 coincides with increased financial leverage, reflecting greater returns to equity holders that are likely amplified by increased risk.

Net Profit Margin

The net profit margin exhibited a decline over the observed period. Starting at 29.97% in 2020, it decreased to 24.25% in 2021, followed by a slight recovery to 26.42% in 2022. However, it again fell to 24.96% in 2023 and experienced a significant drop to 12.77% in 2024. This downward trend indicates a reduction in profitability relative to sales, particularly marked in the final year.

Asset Turnover

Asset turnover demonstrated some variability. The ratio was relatively stable around 0.39-0.40 in 2020 and 2021, then slightly decreased to 0.38 in 2022. A more pronounced decline occurred in 2023, reaching a low of 0.28. The ratio partially recovered to 0.35 in 2024. This pattern suggests fluctuating efficiency in utilizing assets to generate sales, with a notable dip during the middle of the period under review.

Return on Assets (ROA)

The return on assets followed a generally decreasing trajectory. It started at 11.54% in 2020, dropped to 9.63% in 2021, then maintained a slight improvement to 10.06% in 2022. From 2022 onwards, ROA declined more sharply to 6.91% in 2023 and further down to 4.45% in 2024. This trend indicates diminishing overall profitability relative to the total assets employed, reflecting both the declines in profit margin and in asset utilization efficiency.

Summary

Overall, the financial ratios reveal a weakening financial performance over the five-year span. The most notable changes are the sharp decline in net profit margin and the reduction of return on assets, especially in the final year, which points to challenges in maintaining profitability and asset efficiency. While asset turnover showed some recovery toward the end of the period, it remained below the initial levels, contributing to the declining ROA. These trends may indicate increased operational costs, pricing pressures, or asset underutilization affecting profitability and overall returns.

Tax Burden

The tax burden ratio remained relatively stable over the five-year period, fluctuating slightly between 0.86 and 0.89. This suggests consistency in the relationship between pre-tax and after-tax earnings, with a minor dip in 2023 followed by recovery in 2024.

Interest Burden

The interest burden ratio showed a clear downward trend from 0.87 in 2020 to 0.59 in 2024. This decline indicates increasing interest expenses relative to earnings before interest and taxes, which has adversely affected profitability over time.

EBIT Margin

The EBIT margin experienced fluctuations, starting at 38.76% in 2020, dipping to a low of 32.51% in 2021, recovering to 39.87% in 2023, and then sharply declining to 24.24% in 2024. This pattern reflects volatility in operating profitability, with a notable decrease in the most recent year that may warrant further investigation.

Asset Turnover

The asset turnover ratio remained relatively low and showed some variability, beginning at 0.39 in 2020, peaking slightly at 0.40 in 2021, decreasing to 0.28 in 2023, and partially recovering to 0.35 in 2024. The overall pattern suggests moderate efficiency in the use of assets to generate sales, with a downward trend mid-period.

Return on Assets (ROA)

The ROA demonstrated a consistent decline over the period, moving from 11.54% in 2020 down to 4.45% in 2024. This decrease reflects a reduction in the company’s ability to generate net income from its asset base, likely influenced by the declining interest burden ratio and EBIT margin in recent years as well as lower asset turnover.

Tax Burden

The tax burden ratio remained relatively stable over the examined periods, fluctuating narrowly between 0.86 and 0.89. This indicates a consistent level of tax efficiency or tax expense relative to earnings before tax, with a slight dip in 2023 followed by a recovery to prior levels in 2024.

Interest Burden

The interest burden ratio exhibited a declining trend across the years, starting at 0.87 in 2020 and decreasing steadily to 0.59 by 2024. This significant reduction suggests an increasing impact of interest expenses on earnings, negatively affecting the operating income available to cover other costs and taxes.

EBIT Margin

The EBIT margin displayed considerable variability during the period. It started at a high point of 38.76% in 2020, declined to 32.51% in 2021, and then improved again to peak at 39.87% in 2023. However, there was a notable decline in 2024 to 24.24%, indicating reduced operating profitability which may reflect increased costs or pricing pressures.

Net Profit Margin

The net profit margin showed a downward trend overall. From 29.97% in 2020, it decreased steadily to 12.77% by 2024. While there were minor fluctuations, the general direction implies decreasing profitability after all expenses, including taxes and interest, which aligns with the falling interest burden and the late drop in EBIT margin.