Applied Materials Inc. (NASDAQ:AMAT)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrated a consistent upward trend from 2019 through 2022, increasing from 2,934 million USD in 2019 to a peak of 6,900 million USD in 2022. However, a decline is observed subsequently, with values falling to 6,533 million USD in 2023 and further to 6,363 million USD in 2024.

Invested Capital

Invested capital showed a steady increase across the entire period. Starting at 10,129 million USD in 2019, it rose every year, reaching 22,135 million USD by 2024, indicating ongoing capital investment or asset accumulation within the company.

Return on Invested Capital (ROIC)

The ROIC experienced a peak during the 2021 and 2022 periods, with 41.96% and 46.34%, respectively. Initially, it rose from 28.97% in 2019 to 29.68% in 2020, followed by a sharp increase in the next two years. After 2022, the ROIC declined significantly, dropping to 36.75% in 2023 and further down to 28.75% in 2024, approaching the level observed at the beginning of the period.

The financial indicators over the six-year period exhibit notable trends and fluctuations. The operating profit margin (OPM) shows an overall increasing trend from 23.94% in 2019 to a peak of 30.54% in 2021, followed by a slight decline and stabilization around 29.3% in the subsequent years of 2023 and 2024. This suggests an improvement in operational efficiency and profitability up to 2021, with a modest reduction but relative stability thereafter.

The turnover of capital (TO) ratio reveals variability, with a decline from 1.44 in 2019 to 1.31 in 2020, then an increase to 1.73 in 2022, indicating more efficient use of capital assets during that period. However, after 2022, there is a noticeable decrease to 1.23 by 2024, which may reflect less effective utilization or a change in asset base or sales dynamics.

The effective cash tax rate, represented as 1 minus CTR, remains consistently high throughout the years, ranging from 79.85% to 88.24%. The highest values occur between 2020 and 2022, suggesting a high retained earnings rate post-tax or low effective tax payments during these years. The declining trend after 2022 to 79.85% in 2024 indicates a relative increase in cash tax payments or reduced tax optimization.

Return on invested capital (ROIC) exhibits strong growth from 28.97% in 2019, peaking sharply at 46.34% in 2022, which signals a period of highly productive investment and strong returns relative to the capital employed. This peak is followed by a decline to 28.75% in 2024, reverting close to the 2019 level. This pattern indicates significant volatility in capital efficiency and potential challenges in maintaining elevated returns post-2022.

Operating Profit Margin

Increasing through 2021 with stability around 29% thereafter.

Turnover of Capital

Fluctuates, with a peak in 2022 and decline by 2024.

1 minus Effective Cash Tax Rate

High and relatively stable from 2019 to 2022, declining after 2022.

Return on Invested Capital

Strong growth peaking in 2022, followed by a notable decline back near 2019 levels.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes exhibited a consistent upward trend over the six-year period. Beginning at $3,497 million in 2019, it increased steadily each year, reaching $7,968 million in 2024. The most significant rise occurred between 2020 and 2021, where the NOPBT grew by approximately 59.5%. Growth continued at a slower but stable pace in subsequent years, with minor fluctuations observed between 2022 and 2024.

Net Revenue

Net revenue demonstrated a clear positive trajectory throughout the period analyzed. Starting at $14,608 million in 2019, revenue increased sharply to $17,202 million in 2020 and then showed an even larger increase to $23,063 million in 2021. The growth continued, albeit at a slower rate, reaching $27,176 million by 2024. The data suggests sustained sales expansion, with the highest year-over-year increase occurring between 2020 and 2021.

Operating Profit Margin (OPM)

The operating profit margin as a percentage displayed a rising trend from 2019 to 2021, improving from 23.94% to 30.54%. This indicates a notable enhancement in operational efficiency and profitability during the initial three-year period. Following this peak in 2021, the margin showed a slight decline to 30.32% in 2022 and then decreased further to 29.22% in 2023. In 2024, the margin marginally recovered to 29.32%. Overall, the margin remained near 30% in the latter years, suggesting maintained but somewhat stabilizing operational profitability relative to revenue.

General Insights

The company's financial performance over the six-year period reflects strong revenue growth accompanied by increasing net operating profits. The operating profit margin also improved significantly in the early years, signaling improved cost management or pricing power, before stabilizing slightly below the peak of 2021. The increasing absolute profitability alongside expanding revenue confirms effective scaling of operations. However, the slight erosion in operating margin after 2021 suggests there may be emerging pressures on cost efficiency or competitive factors affecting profitability ratio. Overall, the financial data portrays a company in growth mode with strong profitability metrics sustained over time.

Net Revenue

Net revenue has shown a consistent upward trend throughout the periods analyzed. Starting at $14,608 million in 2019, revenue increased to $17,202 million in 2020 and saw a significant rise to $23,063 million in 2021. The upward trajectory continued with net revenue reaching $25,785 million in 2022, $26,517 million in 2023, and $27,176 million in 2024. Overall, this indicates steady growth in revenue over the six-year period with a notably sharp increase between 2020 and 2021.

Invested Capital

The invested capital also demonstrated consistent growth, increasing from $10,129 million in 2019 to $13,090 million in 2020 and further to $14,717 million in 2021. Growth remained steady through 2022, reaching $14,890 million, before accelerating to $17,777 million in 2023 and significantly jumping to $22,135 million in 2024. This reflects ongoing and increasing capital investment, particularly marked by a larger increase in the last two years of the period.

Turnover of Capital (TO)

The turnover of capital ratio experienced some fluctuations over the reported years. It started at 1.44 in 2019 before declining to 1.31 in 2020. It then rebounded to a peak of 1.57 in 2021 and further increased to 1.73 in 2022, representing the highest efficiency in the use of invested capital during the period. However, after 2022, the ratio declined to 1.49 in 2023 and dropped further to 1.23 in 2024. This pattern suggests that although capital investments increased, the efficiency with which that capital is generating revenue diminished in the last two years.

Summary of Insights

The analysis reveals continuous growth in both net revenue and invested capital, highlighting expansion efforts and increased scale of operations. However, the turnover of capital ratio indicates that the efficiency of capital deployment improved until 2022 but experienced a decline in subsequent years. The decrease in capital turnover ratio despite rising revenues and invested capital could point to less efficient capital utilization or increased capital intensity in recent periods. Overall, the company is growing but faces challenges in maintaining the earlier gains in capital efficiency.

Over the analyzed periods, there has been a consistent increase in cash operating taxes. Starting from 563 million US dollars in 2019, the figure rose steadily each year, reaching 1,606 million US dollars by 2024. This indicates a growing tax expense in absolute terms over the six-year span.

Net operating profit before taxes (NOPBT) also shows an upward trajectory, increasing from 3,497 million US dollars in 2019 to a peak of 7,819 million US dollars in 2022. While there was a slight decrease to 7,748 million US dollars in 2023, the figure rebounded to 7,968 million US dollars in 2024. Overall, NOPBT roughly doubled over the period, reflecting improving operational profitability before taxation.

The effective cash tax rate (CTR) demonstrated some fluctuation during the years. It declined from 16.1% in 2019 to a low near 11.76% in 2022, suggesting enhanced tax efficiency or possibly the impact of tax planning strategies during that time. However, post-2022, the effective tax rate rose considerably to 20.15% in 2024, possibly indicating changes in tax policy, profitability mix, or reduced tax benefits. This increase in tax rate aligns with the significant rise in cash operating taxes observed most recently.

Summary of Observations:

The upward trend in both cash operating taxes and NOPBT signifies solid operational growth paired with increasing absolute tax obligations.

The initial decline followed by a sharp rise in the effective cash tax rate suggests a changing tax environment or strategy that impacts the company's overall tax expense relative to its profits.

Despite fluctuations in tax rate, profitability before taxes remains robust, highlighting sustained operational strength over the period analyzed.