Celgene Corp. (NASDAQ:CELG)

The financial data reveals several important trends over the five-year period ending in 2018. Key financial metrics such as Net Operating Profit After Taxes (NOPAT), Invested Capital, and Return on Invested Capital (ROIC) demonstrate varying performance dynamics.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows moderate fluctuations from 2014 through 2017, rising initially to 1,826 million in 2014, then slightly declining to 1,787 million in 2015. It subsequently increases to 1,954 million in 2016, followed by a marginal decrease to 1,913 million in 2017. The most notable change occurs in 2018, where NOPAT significantly increases to 4,676 million. This sharp rise indicates improved operational profitability in 2018 compared to the previous years.

Invested Capital

Invested Capital nearly doubles from 9,844 million in 2014 to 18,136 million in 2015, displaying substantial growth in the capital base. It then shows moderate increases in the following years, reaching 18,672 million in 2016 and 18,857 million in 2017. By 2018, Invested Capital grows further to 27,773 million, indicating an overall expanding asset or investment base over the period, with a particularly strong increase in the final year.

Return on Invested Capital (ROIC)

ROIC experiences a significant decline from a high of 18.55% in 2014 to 9.85% in 2015, reflecting reduced efficiency in generating returns from invested capital during this period. It marginally recovers to 10.47% in 2016 and slightly decreases to 10.15% in 2017. A notable improvement is observed in 2018, with ROIC rising to 16.84%, suggesting enhanced utilization of invested capital to generate profits. This rebound aligns with the marked increase in NOPAT in 2018.

In summary, the financial data indicates a period of investment expansion and fluctuating profitability, culminating in a substantial improvement in both profitability and capital efficiency in 2018. The sharp increase in NOPAT and the corresponding rise in ROIC in the final year suggest successful operational and capital management strategies that improved returns despite the significantly higher invested capital base.

Operating Profit Margin (OPM)

The operating profit margin showed a decline from 32.76% in 2014 to approximately 25.47% in 2015 and remained relatively stable at 25.4% in 2016. However, a substantial increase occurred in 2017 and 2018, with the margin rising sharply to 36.66% and slightly decreasing to 36.46%, indicating improved operational efficiency or cost management in the latter years.

Turnover of Capital (TO)

Capital turnover experienced a downward trend overall, starting at 0.77 in 2014 and dropping to 0.51 in 2015. A moderate recovery followed in 2016 and 2017, with ratios of 0.6 and 0.69 respectively, but it declined again to 0.55 in 2018. This fluctuation suggests variable asset utilization efficiency, with some improvement mid-period but an overall weakening compared to the start.

1 – Effective Cash Tax Rate (CTR)

The 1 minus effective cash tax rate exhibited significant volatility across the periods. Beginning at 73.63% in 2014, it increased to 76.29% in 2015, then declined to 68.85% in 2016. A notable drop to 40.14% occurred in 2017, followed by a sharp rebound to 83.81% in 2018. These swings imply considerable variation in effective tax burden or tax planning outcomes year-over-year.

Return on Invested Capital (ROIC)

ROIC saw a marked decrease from 18.55% in 2014 to 9.85% in 2015, remaining near this lower level with slight variations (10.47% in 2016 and 10.15% in 2017). In 2018, ROIC increased significantly to 16.84%, indicating better returns from invested capital after a period of lesser performance.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT exhibited a generally increasing trend over the five-year period. Starting at 2,480 million USD in 2014, it experienced a slight decline in 2015 to 2,342 million USD. From 2016 onward, there was a considerable upward trajectory, with values rising to 2,839 million USD in 2016, 4,766 million USD in 2017, and reaching 5,579 million USD by the end of 2018. This demonstrates significant growth in profitability before tax over time, particularly notable after 2015.

Adjusted Net Product Sales

Adjusted net product sales showed consistent and strong growth throughout the period. Beginning at 7,569 million USD in 2014, sales increased steadily each year to 9,195 million USD in 2015, 11,177 million USD in 2016, 12,999 million USD in 2017, and culminating at 15,302 million USD in 2018. This consistent rise reflects expanding market demand or successful sales strategies contributing to revenue enhancement.

Operating Profit Margin (OPM)

The operating profit margin experienced fluctuations during the period. Initially, the margin was 32.76% in 2014 but declined to approximately 25.5% in 2015 and 2016, indicating a reduction in operating efficiency or increased operating costs relative to sales in those years. There was a pronounced recovery in 2017, with the margin rising sharply to 36.66%, nearly returning to or exceeding the initial level of 2014. The margin held steady in 2018 at 36.46%, reflecting stable and improved profitability relative to revenue late in the period.

Overall Insights

The data indicate a period of expansion characterized by growing sales and improved profitability. Despite an initial dip in operating margin and profit before taxes in 2015, the company achieved robust growth from 2016 onwards. The significant increase in operating profit margin after 2016, coupled with rising sales and NOPBT, suggests enhanced operational efficiency and potentially better cost management. The steady improvement reflects positively on the company’s capacity to convert sales into profits effectively.

Adjusted Net Product Sales

The adjusted net product sales demonstrate a consistent upward trend over the five-year period. Starting at 7,569 million US dollars in 2014, sales increased each year, reaching 15,302 million US dollars in 2018. The year-over-year growth indicates strong revenue expansion, with sales more than doubling by the end of the period.

Invested Capital

Invested capital shows a notable increase, particularly between 2014 and 2015, where it almost doubled from 9,844 million to 18,136 million US dollars. Following 2015, the invested capital grew at a slower rate until 2017, remaining relatively stable around 18,600 to 18,800 million US dollars. However, in 2018, there was another significant rise to 27,773 million US dollars, indicating increased investments or asset accumulation in that year.

Turnover of Capital (TO)

The turnover of capital ratio started at 0.77 in 2014, showing a decline in 2015 to 0.51. It partially recovered in 2016 and 2017, moving to 0.60 and 0.69 respectively, but fell again to 0.55 in 2018. This pattern reflects fluctuating efficiency in utilizing invested capital to generate sales. The lower turnover in 2015 and 2018 suggests periods where capital investments grew faster than sales, reducing asset efficiency. Conversely, the partial recovery in the middle years indicates improved capital productivity during that timeframe.

Overall Observations

Over the analyzed period, sales growth outpaced the moderate increase in invested capital, though capital efficiency varied. The strong sales growth is an indicator of expanding market presence or increased demand. The fluctuations in capital turnover highlight challenges in maintaining consistent asset utilization efficiency. The substantial invested capital increase in 2018, coupled with a drop in turnover, may reflect significant capital expenditures or acquisitions that have yet to fully translate into proportional sales growth.

Cash Operating Taxes

The cash operating taxes exhibited significant fluctuations over the observed period. Initially, there was a decline from US$654 million in 2014 to US$555 million in 2015. This was followed by an increase to US$884 million in 2016. A pronounced surge occurred in 2017, reaching US$2,853 million, before sharply decreasing to US$903 million in 2018. This suggests variability in tax cash outflows possibly related to operational earnings and tax strategies.

Net Operating Profit Before Taxes (NOPBT)

Net operating profit before taxes showed a general upward trend throughout the years analyzed. Starting at US$2,480 million in 2014, there was a slight decline in 2015 to US$2,342 million, followed by consistent increases each subsequent year, culminating in US$5,579 million in 2018. This pattern indicates improving operational profitability over time.

Effective Cash Tax Rate (CTR)

The effective cash tax rate demonstrated considerable volatility across the years. It declined from 26.37% in 2014 to 23.71% in 2015, then rose to 31.15% in 2016. A sharp increase was noted in 2017, where the rate jumped to 59.86%, before dropping steeply to 16.19% in 2018. Such variations could point to changes in tax legislation, extraordinary tax items, or differences in the geographical distribution of taxable income.

Overall Insights

The data indicates that while the company’s operating profitability improved steadily, the cash taxes paid and the effective cash tax rate experienced significant fluctuations. The peak in cash operating taxes and the effective cash tax rate in 2017 stands out as an anomaly relative to the other years, suggesting a potentially exceptional tax event or accounting adjustment in that period. Despite the high tax payments in 2017, the profit growth continued positively, reinforcing overall financial strength. The sharp decrease in the effective tax rate in 2018 may have positively contributed to the increase in net operating profit after taxes.