Applied Materials Inc. (NASDAQ:AMAT)

Return on Assets (ROA)

The Return on Assets displayed an upward trend from 14.22% in 2019 to a peak of 24.41% in 2022. After reaching this peak, there was a slight decline to 22.31% in 2023, followed by a further decrease to 20.86% in 2024. Despite the recent decreases, ROA remains significantly higher than in 2019, indicating improved asset efficiency over the analyzed period.

Financial Leverage

Financial Leverage showed a general declining trend, starting at 2.32 in 2019 and decreasing to 1.81 by 2024. There was some stability observed in 2020 and 2021 at 2.11, before gradual reductions from 2022 onwards. This suggests a deliberate reduction in reliance on debt financing over the years, which could imply a more conservative capital structure or improved equity financing.

Return on Equity (ROE)

Return on Equity experienced significant growth from 32.94% in 2019, reaching a high of 53.51% in 2022. Subsequent years showed a downward movement, falling to 41.94% in 2023 and further to 37.77% in 2024. Despite this decline, ROE remains substantially above the 2019 level, demonstrating enhanced profitability relative to shareholders' equity.

Net Profit Margin

The net profit margin shows a consistent upward trend over the six-year period, increasing from 18.52% in 2019 to 26.41% in 2024. The margin experienced steady growth each year, indicating improved profitability and effective cost management.

Asset Turnover

Asset turnover initially remained stable at 0.77 from 2019 to 2020, followed by an increase to a peak of 0.96 in 2022. However, it subsequently declined to 0.79 by 2024. This pattern suggests enhanced efficiency in utilizing assets during the intermediary years, with some reduction in asset utilization efficiency in the most recent periods.

Financial Leverage

Financial leverage exhibited a downward trend across the timeframe, decreasing from 2.32 in 2019 to 1.81 in 2024. This indicates a deliberate reduction in the use of debt financing relative to equity, potentially reflecting a more conservative capital structure or de-leveraging strategy.

Return on Equity (ROE)

The return on equity rose notably from 32.94% in 2019 to a high of 53.51% in 2022, followed by a decline to 37.77% in 2024. Despite the recent decrease, ROE remains significantly higher than at the start of the period, illustrating strong overall profitability and efficient equity utilization, although the drop after 2022 suggests some moderation in earnings performance or capital efficiency.

Tax Burden

The tax burden ratio exhibits a generally stable pattern over the periods, fluctuating slightly between 0.83 and 0.89. There is a subtle upward trend from 0.83 in 2019 to a peak of 0.89 in 2023, followed by a marginal decline to 0.88 in 2024, indicating consistent effective tax management with minimal variation.

Interest Burden

The interest burden ratio shows a steady and slight increase from 0.93 in 2019 to 0.97 from 2021 onwards, maintaining this level through to 2024. This suggests improved efficiency in managing interest expenses relative to earnings before interest and taxes over the years.

EBIT Margin

The EBIT margin percentage reveals a clear upward trend from 24% in 2019 to approximately 30% and above starting in 2021, reaching a maximum of 30.91% in 2024. This indicates enhanced operational profitability and improved cost management resulting in higher earnings before interest and taxes as a percentage of revenue.

Asset Turnover

The asset turnover ratio demonstrates an initial stability at 0.77 in 2019 and 2020, followed by an increase to 0.96 in 2022, indicating better utilization of assets to generate revenue. However, there is a decline observed in the last two periods, dropping to 0.86 in 2023 and further to 0.79 in 2024, which may signal a reduction in asset efficiency recently.

Financial Leverage

Financial leverage exhibits a declining trend from 2.32 in 2019 down to 1.81 in 2024. The gradual decrease suggests a reduction in reliance on debt financing, leading to potentially lower financial risk and less amplified returns over time.

Return on Equity (ROE)

The return on equity shows significant variation, growing from 32.94% in 2019 to a peak of 53.51% in 2022, followed by a decline to 37.77% in 2024. The initial sharp increase reflects improved profitability and effective use of shareholders' equity, while the subsequent reduction could be attributed to decreased asset turnover and lower financial leverage, affecting overall returns.

The analysis of the annual financial ratios over the six-year period reveals several key trends regarding profitability and efficiency.

Net Profit Margin

The net profit margin demonstrates a consistent upward trajectory from 18.52% in 2019 to 26.41% in 2024. This steady improvement indicates increasing profitability and operational efficiency, suggesting the company has been effective in controlling costs relative to its revenues. The margin growth appears especially notable after 2020, highlighting strong performance during the latter years.

Asset Turnover

The asset turnover ratio, which measures how efficiently the company utilizes its assets to generate sales, shows some fluctuation. Starting at 0.77 in 2019, it remained stable through 2020, then increased to a peak of 0.96 in 2022. However, this ratio declined thereafter to 0.79 by 2024. This trend suggests initial improvements in asset utilization followed by a relative decrease, implying potential challenges in maintaining previous levels of asset efficiency or changes in asset base composition.

Return on Assets (ROA)

The ROA increased substantially from 14.22% in 2019 to a high of 24.41% in 2022, reflecting enhanced overall profitability relative to the asset base. After 2022, ROA declined to 20.86% in 2024, though it remains significantly higher than the starting point. This pattern aligns closely with the fluctuations in asset turnover and the continuous improvement in net profit margin, highlighting that while profitability per asset remains strong, recent decreases possibly indicate less efficient asset utilization or higher asset base growth not fully translating into proportional profit increments.

Overall, the company's profitability metrics have shown marked improvement throughout the period, with net profit margin consistently rising and ROA reaching significant heights before a mild decline. In contrast, asset turnover shows some volatility, indicating varying levels of efficiency in asset utilization. The combination of these trends suggests that profitability gains have been primarily driven by factors other than asset turnover, possibly including cost management and pricing strategy enhancements.

Tax Burden

The tax burden ratio remained relatively stable, ranging between 0.83 and 0.89 over the six-year period. There was a gradual increase from 0.83 in 2019 to a peak of 0.89 in 2023, followed by a slight decline to 0.88 in 2024, indicating minor fluctuations in effective tax rates or tax-related expenses.

Interest Burden

The interest burden ratio showed a consistent upward trend, rising from 0.93 in 2019 to 0.97 from 2021 onwards. This suggests improved management of interest expenses relative to earnings before interest and taxes, implying enhanced control over financing costs or lower debt-related burdens in recent years.

EBIT Margin

The EBIT margin exhibited a positive trend with a notable increase from 24% in 2019 to over 30% in the subsequent years. It peaked at 30.91% in 2024, reflecting improved operational efficiency and profitability at the earnings before interest and taxes level.

Asset Turnover

Asset turnover increased significantly from 0.77 in 2019 to a high of 0.96 in 2022, indicating enhanced efficiency in utilizing assets to generate sales. However, it declined afterwards to 0.79 by 2024, suggesting a slight reduction in asset utilization efficiency in the most recent period.

Return on Assets (ROA)

The ROA mirrored the positive trend seen in EBIT margin, rising substantially from 14.22% in 2019 to a peak of 24.41% in 2022. Subsequently, it decreased to 20.86% by 2024 but remained well above the starting point, demonstrating overall improved profitability relative to total assets despite a slight dip in the latest year.

The analysis of the financial ratios over the six-year period reveals several notable trends relating to the company's profitability and expense management.

Tax Burden

The tax burden ratio exhibits a generally stable and slightly increasing pattern, rising from 0.83 in 2019 to a peak of 0.89 in 2023, before a minor decline to 0.88 in 2024. This suggests a moderate increase in the proportion of earnings retained after tax over the period, indicating effective tax expense management or changes in tax policies impacting net income.

Interest Burden

The interest burden ratio shows a consistent improvement throughout the period, increasing from 0.93 in 2019 to 0.97 from 2021 onwards. The stability at 0.97 over the last four years points to a reduced impact of interest expenses on earnings before taxes, reflecting either lower debt levels, decreased interest rates, or improved financial leverage management.

EBIT Margin

The EBIT margin demonstrates a strong upward trend, increasing from 24% in 2019 to a peak of 30.91% in 2024. This improvement indicates enhanced operational efficiency and better control of operating costs relative to revenue. The margin remains consistently above 30% from 2021 onwards, signifying sustained profitability at the EBIT level.

Net Profit Margin

The net profit margin also follows a positive trajectory, rising from 18.52% in 2019 to 26.41% in 2024. Similar to the EBIT margin, a significant increase is observed between 2019 and 2021, with the net profit margin stabilizing above 25% from 2021 to 2024. This reflects improved overall profitability, encompassing efficient tax and interest burden management alongside operational improvements.

Overall, the ratios indicate a consistent enhancement in profitability and expense management, with the company demonstrating stronger retention of earnings through improved tax and interest expense control, accompanied by increasing operational efficiency as seen in rising EBIT and net profit margins over the period.