Applied Materials Inc. (NASDAQ:AMAT)

The analysis of the financial data over the six-year period reveals several noteworthy trends and insights.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a generally increasing trend from 2019 to 2022, rising from $2,934 million in 2019 to a peak of $6,900 million in 2022. However, a slight decline is observed in the subsequent years, decreasing to $6,533 million in 2023 and further to $6,363 million in 2024. Despite this recent dip, the overall NOPAT growth over the period is substantial, indicating improved operating profitability up to 2022.

Cost of Capital

The cost of capital remains relatively stable throughout the period, fluctuating slightly between 19.18% and 20.32%. This stability suggests consistent capital market conditions or internal financing costs. The highest value is in 2023 at 20.32%, followed by a minor decrease to 20.22% in 2024.

Invested Capital

Invested capital shows a steady upward trajectory, increasing from $10,129 million in 2019 to $22,135 million in 2024. This near doubling of invested capital over six years indicates significant asset growth or capital deployment, which may be aimed at supporting expansion or operational capacity.

Economic Profit

Economic profit rises considerably from $992 million in 2019 to $3,923 million in 2022, suggesting value creation beyond the cost of capital during this period. However, following the peak in 2022, economic profit declines to $2,921 million in 2023 and further to $1,888 million in 2024. Despite this decline, economic profit remains positive, which implies the company continues to generate value over its cost of capital, although at a reduced margin.

In summary, the financial data reflect strong growth in operating profitability and capital investment up to 2022, accompanied by increasing economic profit indicating effective value creation. The subsequent years show a moderation in profitability and economic profit, suggesting potential challenges or shifts in operational efficiency or market conditions. The cost of capital remains consistent, highlighting stable financing costs despite fluctuations in profitability.

The financial data reveals a general upward trend in the company's profitability over the years under review.

Net Income

Net income has shown consistent growth from 2019 through 2024. Starting at 2,706 million US dollars in 2019, it increased steadily each year to reach 7,177 million US dollars in 2024. This represents a more than doubling of net income over the six-year period, indicating strong financial performance and effective management of expenses relative to revenue.

Net Operating Profit After Taxes (NOPAT)

NOPAT also exhibited growth from 2019 through 2022, increasing from 2,934 million US dollars to 6,900 million US dollars, which reflects improvements in operating efficiency and tax management. However, there is a slight downward trend observed in the last two years, decreasing to 6,533 million in 2023 and further to 6,363 million in 2024. This suggests a potential reduction in operational efficiency or changes in tax impacts during the most recent period.

Comparing net income and NOPAT trends, it is evident that while net income maintains a robust growth path, NOPAT has begun to stabilize and slightly decline. This may indicate increased financial activities or non-operating gains contributing to net income, or possible changes in operational conditions needing further investigation.

Provision for Income Taxes

The provision for income taxes shows a general upward trend over the six-year period. Starting at $563 million in 2019, it slightly decreased to $547 million in 2020 but then increased substantially to $883 million in 2021. This upward trajectory continued with provisions of $1,074 million in 2022. A decrease occurred in 2023, with the provision falling to $860 million, followed by a rebound to $975 million in 2024. These fluctuations suggest variability in taxable income or changes in tax rates or regulations impacting the tax provision.

Cash Operating Taxes

Cash operating taxes show a consistent and pronounced increase throughout the period. Beginning at $563 million in 2019, cash taxes slightly decreased to $530 million in 2020 but then rose steadily each subsequent year: $868 million in 2021, $920 million in 2022, followed by a more marked increase to $1,215 million in 2023, and reaching $1,606 million in 2024. This substantial increase in cash taxes paid indicates growing tax liabilities settled in cash, which may reflect higher taxable income or changes in tax payment schedules and cash flow management.

Comparative Analysis

The provision for income taxes and cash operating taxes follow somewhat similar trends with both increasing from 2020 onwards, though the cash taxes show a more aggressive increase from 2022 to 2024. Notably, cash operating taxes exceeded the provision for income taxes from 2023 onwards, implying potential timing differences between accrued tax expenses and actual tax payments or adjustments such as payment of prior year liabilities or changes in deferred tax balances.

The financial data reveals several notable trends over the six-year period. Total reported debt and leases increased steadily from 5,464 million US dollars in 2019 to 6,605 million US dollars in 2024. This represents a moderate but consistent growth in the company's financial obligations, suggesting an ongoing strategy involving increased leverage or financing through debt instruments.

Stockholders’ equity exhibited significant growth, rising from 8,214 million US dollars in 2019 to 19,001 million US dollars in 2024. This increase reflects a strengthening equity base, which may be attributed to retained earnings, new equity issuances, or asset revaluation. The growth in equity outpaces the growth in reported debt, indicating an overall improvement in the company’s financial position from an equity perspective.

Invested capital also demonstrated a rising trend, growing from 10,129 million US dollars in 2019 to 22,135 million US dollars in 2024. This metric encompasses both equity and debt financing, and its increase corresponds with the observed growth in both debt and equity. The substantial growth in invested capital suggests increased investment in company assets, potentially aimed at supporting expansion or enhancing operational capacity.

Overall, the data indicates a company that is incrementally increasing its financial leverage while simultaneously enhancing its equity base and investing more capital into the business. This balanced growth in debt and equity, coupled with the substantial rise in invested capital, may imply strategic investments geared toward long-term growth objectives.

Economic Profit

The economic profit shows a significant upward trend from 2019 to 2022, increasing from 992 million US dollars in 2019 to a peak of 3,923 million US dollars in 2022. Following this peak, there is a noticeable decline over the subsequent two years, dropping to 2,921 million in 2023 and further to 1,888 million in 2024, indicating a reduction in profitability after 2022.

Invested Capital

Invested capital exhibits consistent growth throughout the entire period. Starting at 10,129 million US dollars in 2019, it rises steadily to 22,135 million by 2024. This trend suggests an ongoing increase in the resources allocated to the business, nearly doubling over the six-year span.

Economic Spread Ratio

The economic spread ratio follows a distinct pattern, initially increasing moderately from 9.79% in 2019 to 10.1% in 2020, then sharply rising to a peak of 26.34% in 2022. After reaching this high point, the ratio declines substantially to 16.43% in 2023 and further to 8.53% in 2024, reflecting diminishing returns relative to the invested capital during the last two observed periods.

Summary

Overall, the data reveals that while invested capital consistently grows, the economic profit and economic spread ratio both peak in 2022 and subsequently decline in the following two years. This may indicate increasing challenges in generating profit relative to the capital invested after 2022, potentially pointing to shifts in operational efficiency, market conditions, or competitive factors impacting profitability.

Net Revenue

The net revenue shows a consistent upward trend across the periods analyzed, increasing from $14,608 million in October 2019 to $27,176 million in October 2024. This steady growth indicates expanding sales or higher pricing power over the five-year span.

Economic Profit

Economic profit has experienced significant fluctuations. Starting at $992 million in October 2019, it rose to a peak of $3,923 million in October 2022 before declining to $1,888 million by October 2024. This pattern suggests strong performance improvement until 2022, followed by a marked decrease in the subsequent years.

Economic Profit Margin

The economic profit margin moved in a pattern consistent with economic profit. It increased substantially from 6.79% in October 2019 to a high of 15.21% in October 2022, demonstrating improved profitability relative to net revenue during this period. However, the margin declined sharply to 6.95% by October 2024, aligning with the lower economic profit despite continued revenue growth.

Overall Insights

While net revenue has shown continuous growth, the economic profit and its margin have exhibited volatility, peaking mid-period and subsequently declining. This may reflect changing cost structures, increased competition, or investments impacting profitability. The decline in economic profit margin toward the latest period indicates reduced efficiency in generating profit from revenue despite higher sales.