AppLovin Corp. (NASDAQ:APP)

Return on Assets (ROA)

The return on assets showed a fluctuating trend over the period. Starting at a modest positive level of 0.58% at the end of 2021, it declined significantly to -3.3% by the end of 2022, indicating negative profitability relative to the company's assets during that year. However, this was followed by a strong recovery and increase to 6.66% in 2023 and a substantial rise to 26.92% by the end of 2024, suggesting improved efficiency in asset utilization and enhanced profitability over time.

Financial Leverage

Financial leverage exhibited a consistent upward trend throughout the period. It increased from 2.88 times at the end of 2021 to 3.07 times in 2022, then rose more notably to 4.27 times in 2023, and further expanded to 5.39 times by the end of 2024. This rising leverage indicates a growing use of debt or borrowed funds in the company's capital structure, which may increase risk but also potentially amplify returns to equity holders.

Return on Equity (ROE)

The return on equity experienced substantial volatility over the years. It began at a low positive rate of 1.66% in 2021, plummeted to a negative value of -10.13% in 2022, reflecting losses or reduced profitability from shareholders’ perspective. This was followed by a notable rebound to 28.39% in 2023 and a dramatic increase to 144.96% in 2024. The latter figures indicate a highly profitable period for shareholders, potentially amplified by the increased financial leverage observed.

Net Profit Margin

The net profit margin demonstrated a significant fluctuation over the observed period. It started at a modest positive margin of 1.27% and declined sharply to a negative margin of -6.84% in the following year, indicating a period of losses. However, from then on, there was a strong recovery and substantial growth, reaching 10.87% and further increasing to 33.55%. This indicates a notable improvement in profitability and cost management after the initial downturn.

Asset Turnover

The asset turnover ratio showed a consistent upward trend, rising steadily from 0.45 to 0.48, then to 0.61, and finally reaching 0.8. This indicates increasingly efficient use of assets to generate sales revenue over time, reflecting improved operational performance and asset utilization strategies.

Financial Leverage

Financial leverage increased markedly through the years, beginning at 2.88 and growing to 3.07, then more significantly to 4.27 and 5.39. This suggests a progressively higher reliance on debt or borrowing to finance the company’s assets, potentially amplifying returns but also increasing financial risk.

Return on Equity (ROE)

Return on equity experienced wide volatility during the period. Initially low at 1.66%, it dropped to a negative return of -10.13% in the subsequent year, consistent with the decline seen in net profit margin. Following this, the ROE rebounded substantially to 28.39% and then surged impressively to 144.96%. Such a sharp increase indicates very strong shareholder returns, likely driven by the combined effects of improved profitability, higher asset efficiency, and increased financial leverage.

Tax Burden

The tax burden ratio shows a positive upward trend from 0.76 in 2021 to 0.94 in 2023, reaching 1.00 in 2024. This indicates an improving efficiency in tax expenses relative to pre-tax income, culminating in no tax expense impact by 2024.

Interest Burden

The interest burden ratio increased from 0.31 in 2021 to 0.58 in 2023 and further to 0.83 in 2024. This suggests a gradual reduction in interest expenses relative to operating income, enhancing after-interest income retention over the period.

EBIT Margin

The EBIT margin demonstrated significant improvement, starting at 5.36% in 2021, dipping to negative territory (-1.18%) in 2022, then sharply rebounding to 19.99% in 2023 and increasing further to 40.22% in 2024. This indicates improved operational profitability with strong growth in income generated from core operations.

Asset Turnover

Asset turnover ratio steadily increased from 0.45 in 2021 to 0.8 in 2024, reflecting enhanced efficiency in utilization of assets for revenue generation over the years.

Financial Leverage

Financial leverage expanded from 2.88 in 2021 to 5.39 by 2024. This rise denotes a growing reliance on debt financing or equity leverage, amplifying potential returns but also increasing financial risk.

Return on Equity (ROE)

ROE exhibited a highly volatile pattern with a decline from 1.66% in 2021 to a negative -10.13% in 2022, followed by a sharp recovery to 28.39% in 2023 and a dramatic surge to 144.96% in 2024. The substantial rise in ROE corresponds with the improvements in EBIT margin, asset turnover, and leverage, suggesting substantially enhanced shareholder value generation.

The financial data reveals notable trends in profitability, asset efficiency, and overall performance over the four-year period under review.

Net Profit Margin

The net profit margin exhibits significant volatility and a pronounced upward trend. Initially, the margin was modestly positive at 1.27% in the first year, followed by a decline reaching a negative 6.84% in the subsequent year, indicating a period of operational losses or increased expenses relative to revenue. The margin then recovers substantially, rising to 10.87% and further expanding remarkably to 33.55% by the final year. This pattern suggests effective cost management, revenue growth, or structural improvements leading to enhanced profitability.

Asset Turnover

The asset turnover ratio demonstrates consistent improvement throughout the period. Starting at 0.45, it gradually increases each year to 0.48, then 0.61, and ultimately reaches 0.80. This trend indicates an increasing efficiency in generating sales from the company's asset base, which likely reflects better asset utilization or growth in revenue relative to assets.

Return on Assets (ROA)

The return on assets follows a trajectory reflecting the profitability trends but is more sensitive to changes in both profit margin and asset usage. It begins at a low positive 0.58%, declines to a negative 3.3% coinciding with the negative net profit margin year, then recovers to 6.66%, and sharply rises to 26.92% by the last recorded period. This sharp improvement in ROA signifies that the company not only improved profitability but also enhanced its ability to generate income from its assets.

Overall, the data indicates a challenging phase with losses or reduced profitability followed by strong recovery and substantial improvement in operational efficiency and financial performance. The upward trends in net profit margin, asset turnover, and ROA suggest the company has strengthened its financial position and asset utilization effectively over the reviewed period.

Tax Burden

The tax burden ratio showed a positive trend, increasing from 0.76 in late 2021 to 0.94 in 2023, eventually reaching 1 by the end of 2024. This indicates a gradual reduction in the tax expense impact on pre-tax earnings, suggesting improved tax efficiency or changes in tax strategy.

Interest Burden

The interest burden ratio improved substantially over the analyzed period. Starting from a low value of 0.31 in 2021, it rose to 0.58 in 2023 and further to 0.83 in 2024. This trend reflects a reduction in interest expenses relative to earnings before interest and taxes, implying either decreased debt levels or more favorable interest rates.

EBIT Margin

The EBIT margin exhibited significant volatility and improvement. It declined sharply from 5.36% in 2021 to a negative -1.18% in 2022, indicating operational challenges or cost increases during that year. However, it rebounded strongly to 19.99% in 2023 and further improved to 40.22% in 2024, demonstrating a marked enhancement in operational profitability and cost management.

Asset Turnover

The asset turnover ratio showed a steady upward trend, increasing from 0.45 in 2021 to 0.48 in 2022, 0.61 in 2023, and reaching 0.8 in 2024. This progression indicates improving efficiency in the use of assets to generate revenue, reflecting potentially better asset management or revenue growth outpacing asset growth.

Return on Assets (ROA)

The return on assets followed a pattern of decline followed by robust recovery and growth. It decreased from 0.58% in 2021 to -3.3% in 2022, signaling a period of unprofitability relative to the asset base. Subsequently, it increased significantly to 6.66% in 2023 and surged to 26.92% in 2024. This dramatic improvement suggests enhanced overall profitability driven by combined effects of better operational margins, asset utilization, and reduced interest and tax burdens.

Tax Burden

The tax burden ratio exhibits an overall increasing trend from 0.76 in 2021 to a peak value of 1.00 in 2024, indicating a rising proportion of earnings retained after taxes. The increase from 2021 to 2023 is significant, moving from 0.76 to 0.94, despite missing data for 2022.

Interest Burden

This ratio shows substantial improvement over the observed period. Starting at 0.31 in 2021, it increases markedly to 0.83 by 2024. This suggests that the company has been managing its interest expenses more effectively, reducing the proportion of earnings lost to interest charges.

EBIT Margin

The EBIT margin experiences considerable volatility initially, descending from 5.36% in 2021 to a negative margin of -1.18% in 2022. However, a strong recovery occurs after 2022, with the margin rising sharply to 19.99% in 2023 and reaching an impressive 40.22% in 2024, indicating improved operational profitability and efficiency.

Net Profit Margin

The net profit margin mirrors the EBIT margin trend with initial deterioration followed by significant recovery. It declines from a modest 1.27% in 2021 to a negative margin of -6.84% in 2022 but rebounds to 10.87% in 2023 and further to 33.55% in 2024. This dramatic improvement points to enhanced overall profitability and better cost control across the company’s operations.