Celgene Corp. (NASDAQ:CELG)

The financial data reveals several notable trends over the five-year period ending on December 31, 2018. The net operating profit after taxes (NOPAT) exhibits a relatively stable pattern from 2014 through 2017, fluctuating between approximately 1,787 and 1,954 million US dollars, with a slight dip in 2015 and a marginal recovery in 2016. However, in 2018, NOPAT shows a significant increase to 4,676 million US dollars, more than doubling the previous year's figure.

The cost of capital demonstrates a downward trend across the period, decreasing steadily from 17.71% in 2014 to 15.08% in 2018. This reduction implies a lowering in the company’s hurdle rate or required return, which may influence its investment decisions and valuation metrics.

Invested capital grows markedly from 9,844 million US dollars in 2014 to 27,773 million US dollars in 2018. The major increment occurs between 2014 and 2015, where invested capital nearly doubles, followed by modest annual increases until a more pronounced rise again into 2018. This suggests substantial capital deployment, possibly for expansion, acquisitions, or other strategic projects.

Examining economic profit, the company records a positive figure of 83 million US dollars in 2014 but then experiences consecutive negative values from 2015 through 2017, with the lowest point being -1,162 million US dollars in 2015. This indicates that during these years, returns did not surpass the cost of capital, resulting in value destruction. However, in 2018, economic profit returns to a positive 488 million US dollars, signaling recovery and value creation.

Overall, the period analyzed reflects initial challenges in generating returns above the cost of capital despite increasing invested capital, as shown by negative economic profits during the middle years. The significant improvement in NOPAT combined with the return to positive economic profit in 2018 signals a turnaround in operational performance and value generation, despite a continued increase in invested capital. The declining cost of capital may have also facilitated improved profitability metrics.

Net Income

The net income demonstrates a fluctuating yet generally upward trend over the five-year period. Starting at $2,000 million in 2014, it experienced a notable decline to $1,602 million in 2015. This was followed by a recovery in 2016, reaching $1,999 million, subsequently increasing more substantially in 2017 to $2,940 million. The most significant growth occurred in 2018, with net income reaching $4,046 million, more than doubling the 2015 low point and exceeding the 2014 figure by a substantial margin. This trend suggests an overall improvement in profitability, with a particularly strong performance in the final year under review.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a more consistent pattern over the period, with marginal fluctuations between 2014 and 2017. It started at $1,826 million in 2014, experienced a slight decrease to $1,787 million in 2015, then increased moderately to $1,954 million in 2016, before a small decrease to $1,913 million in 2017. A significant increase occurred in 2018, with NOPAT more than doubling to $4,676 million. This sharp rise contrasts with the relative stability of previous years and indicates a substantial improvement in operational efficiency or profitability in 2018. The disparity between net income and NOPAT values also suggests changes in tax impact or non-operating items affecting earnings.

Overall Analysis

Both net income and NOPAT reveal a period of relative stability or moderate variation from 2014 to 2017, followed by significant growth in 2018. The sharp increase in 2018 for both metrics represents a notable positive shift in financial performance. While net income shows some volatility, NOPAT is comparatively stable until the final year, indicating consistent operating profitability prior to the substantial improvement. The data suggests the company may have implemented effective strategies or benefited from market conditions that dramatically enhanced profitability and operational results in 2018.

Provision for taxes on income

The provision for taxes on income exhibited fluctuations over the observed period. Starting at $328 million in 2014, it increased to $422 million in 2015, then decreased to $373 million in 2016. A significant rise occurred in 2017, reaching $1,374 million, followed by a notable decline to $786 million in 2018. This pattern indicates volatility in the tax obligations estimated for income taxes, with a pronounced peak in 2017.

Cash operating taxes

Cash operating taxes showed a similar volatile pattern. Beginning at $654 million in 2014, the value fell to $555 million in 2015, then rose substantially to $884 million in 2016. A dramatic increase was observed in 2017, peaking at $2,853 million. The following year, 2018, saw a sharp decrease to $903 million. This trend suggests a significant variation in the actual cash tax payments, with the highest cash outflow recorded in 2017.

Comparative insights

Both provisions for income taxes and cash operating taxes demonstrate notable volatility with peaks in 2017. The magnitude of cash operating taxes consistently exceeds the provision for taxes, particularly evident in 2017 when cash taxes were more than double the provision amount. This discrepancy might indicate timing differences or adjustments between accrued tax expenses and actual cash payments during these periods.

Overall trend

The data reveals inconsistent patterns in both tax provisions and cash taxes over the five years, with a significant spike in 2017 followed by a decrease in 2018. The spikes may be linked to underlying changes in earnings, tax planning strategies, or external tax regulations affecting the company’s tax liabilities and payments.

Total reported debt & leases

The total reported debt and leases exhibited a significant upward trend over the five-year period. Starting at $7,068 million in 2014, the figure more than doubled by 2015 to $14,456 million. It then remained relatively stable in 2016 around $14,480 million before increasing consistently to reach $20,645 million by 2018. This indicates a growing reliance on debt and lease obligations to finance operations or investments during this timeframe.

Stockholders’ equity

Stockholders’ equity showed some fluctuations with no clear positive trend. The equity started at $6,525 million in 2014, decreased to $5,919 million in 2015, then increased gradually in 2016 and 2017 to reach $6,921 million. However, in 2018, equity declined again to $6,161 million. This pattern may suggest variability in retained earnings, issuance or repurchase of shares, or other equity-related activities affecting the net book value of shareholders' investment.

Invested capital

Invested capital expanded substantially over the period assessed. It nearly doubled from $9,844 million in 2014 to $18,136 million in 2015 and then continued to grow steadily to $18,672 million in 2016 and $18,857 million in 2017. A marked increase occurred in 2018, with invested capital soaring to $27,773 million. This substantial growth points to increased capital deployment into long-term assets or working capital, possibly reflecting strategic expansion or acquisition initiatives supported partially by rising debt levels.

The financial data reveals significant fluctuations in economic profit over the five-year period examined. Initially, economic profit was positive in 2014, followed by a sharp decline into deeply negative territory from 2015 through 2017. A notable recovery occurred in 2018, with economic profit returning to a positive figure.

Invested capital increased consistently throughout the period. Starting from $9,844 million in 2014, it nearly doubled by 2015 and continued to grow steadily through 2018, reaching $27,773 million. This reflects substantial capital deployment over the years under review.

The economic spread ratio mirrors the trend seen in economic profit. It was modestly positive in 2014 at 0.84%, then fell sharply into negative territory for three consecutive years. By 2018, the ratio rebounded to a positive 1.76%, indicating an improvement in the return on invested capital relative to its cost.

Economic Profit Trends

The transition from positive to negative economic profit between 2014 and 2015 suggests a period of underperformance or increased costs relative to returns. The sustained negative economic profit across three years points to ongoing challenges in value creation. The rebound to a positive figure in 2018 indicates a potential turnaround or improved operational efficiency.

Invested Capital Growth

The steady increase in invested capital denotes ongoing investments or acquisitions to support company growth. The significant jump between 2014 and 2015 may indicate a strategic expansion or capital-intensive initiatives undertaken during that period.

Economic Spread Ratio Analysis

The economic spread ratio's decline into negative values aligns with the negative economic profit years, underscoring a gap where the cost of capital exceeded returns. The positive spread in 2018 suggests a restoration of value generation above the cost of capital.

Overall, the data illustrates a period marked by heavy investment and initial profitability challenges, followed by signs of recovery. The improvement in economic profit and spread ratio by the final year signals a positive shift in the company's financial performance.

Economic Profit

The economic profit exhibited considerable volatility over the five-year period. Initially positive at 83 million US dollars in 2014, it sharply declined into negative territory in 2015, recording -1162 million. This negative trend persisted in 2016 and 2017 with values of -1131 million and -1054 million respectively, before showing recovery in 2018 with a positive figure of 488 million. This pattern indicates a period of significant economic losses spanning three years, followed by a return to profitability in the final year observed.

Adjusted Net Product Sales

The adjusted net product sales demonstrated steady and consistent growth throughout the observed period. Starting at 7,569 million US dollars in 2014, sales increased each year, reaching 9,195 million in 2015, 11,177 million in 2016, 12,999 million in 2017, and culminating at 15,302 million in 2018. This upward trajectory reflects a successful expansion or increased market demand for the company's products over time.

Economic Profit Margin

The economic profit margin mirrored the trend seen in economic profit, beginning with a modest positive margin of 1.09% in 2014, followed by steep declines to negative margins of -12.64%, -10.12%, and -8.11% in 2015, 2016, and 2017 respectively. In 2018, the margin returned to positive at 3.19%. This indicates that while the company struggled with profitability during the middle years, it managed to improve operational efficiency or cost management to generate a positive margin again in 2018.