Cisco Systems Inc. (NASDAQ:CSCO)

Net Operating Profit After Taxes (NOPAT)

Over the six-year period, NOPAT exhibited an overall upward trend, increasing from $9,686 million in 2019 to a peak of $12,636 million in 2023, before a slight decline to $12,178 million in 2024. Notably, the most significant increase occurred between 2019 and 2020, where NOPAT rose by approximately 33%. After this jump, NOPAT fluctuated moderately but remained above $11,000 million throughout the remaining years.

Invested Capital

Invested capital remained relatively stable from 2019 to 2023, starting at $53,469 million and rising incrementally to $58,979 million. However, in 2024, there was a significant increase to $91,785 million, representing a sharp rise of more than 55% compared to the prior year. This suggests a notable expansion in capital deployment or asset accumulation during the latest year.

Return on Invested Capital (ROIC)

ROIC displayed variability over the period, reaching the highest point of 24.12% in 2020. After this peak, it generally declined, falling to 20.34% in 2021, then slightly recovering to around 21% in 2022 and 2023. In 2024, ROIC experienced a marked drop to 13.27%, indicating a reduction in efficiency or profitability relative to invested capital. This decline coincides with the sharp increase in invested capital, suggesting that the additional capital has not yet translated into proportional profit generation.

Summary

The data indicates that while profitability as measured by NOPAT has generally increased, the substantial growth in invested capital in 2024 led to a significant decline in ROIC, highlighting potential challenges in capital efficiency. The earlier years showed stable capital levels and relatively strong returns, but recent changes suggest a strategic shift or investment phase that may impact profitability metrics in the short term.

Operating Profit Margin (OPM)

The operating profit margin demonstrated an overall upward trend from 25.46% in 2019, peaking at 30.47% in 2020. Subsequent years saw a slight decline, fluctuating around 28.5% to 29.3% before decreasing to 26.47% in 2024. This suggests a period of improving operational efficiency followed by a moderate reduction in margin in the most recent year.

Turnover of Capital (TO)

The turnover of capital remained relatively stable around 0.9 to 0.96 from 2019 through 2022. A notable increase to 1.01 occurred in 2023, indicating more efficient use of capital during that year. However, 2024 saw a sharp decline to 0.62, reflecting a significant decrease in capital turnover and suggesting less efficient capital utilization in the latest period.

1 – Effective Cash Tax Rate (CTR)

This metric was consistently high, ranging from approximately 72.94% to 82.6% across the years. The highest value was observed in 2020 (82.6%), followed by fluctuations within the mid-70s to low 80s percentile, ending at 81.12% in 2024. The consistently elevated levels indicate a relatively high effective tax burden throughout the periods analyzed.

Return on Invested Capital (ROIC)

ROIC increased significantly from 18.12% in 2019 to a peak of 24.12% in 2020, indicating enhanced profitability relative to invested capital. Thereafter, it declined somewhat but remained above 20% until 2023. In 2024, ROIC dropped sharply to 13.27%, pointing to a considerable reduction in capital efficiency and profitability in the most recent year.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes demonstrated an overall increasing trend from 2019 through 2023, rising from $12,902 million in 2019 to a peak of $17,324 million in 2023. This represents a significant increase over the five-year period. However, in 2024, there is a noticeable decline, with NOPBT decreasing to $15,014 million, indicating a reduction in profitability compared to the previous year.

Adjusted Revenue

Adjusted revenue exhibited steady growth from 2019 to 2023, increasing from $50,686 million to $59,284 million. The growth was consistent but showed an acceleration in 2023. In 2024, however, adjusted revenue decreased to $56,728 million, signaling a contraction after several years of growth.

Operating Profit Margin (OPM)

The operating profit margin showed variability but remained generally strong. Starting at 25.46% in 2019, it rose to a high of 30.47% in 2020. After declining slightly to 28.52% in 2021, it stabilized around 29% in 2022 and 2023. In 2024, the margin decreased to 26.47%, marking a notable contraction in operating efficiency relative to revenue.

Summary of Trends

From 2019 through 2023, the financial data indicates a positive trend in both profitability and revenue growth, with operating profit margins maintaining a relatively high level. However, the year 2024 reflects a tightening in both profitability and revenue, with declines in NOPBT, adjusted revenue, and operating profit margin. These changes suggest emerging challenges affecting profitability and operating efficiency during the most recent fiscal year.

Adjusted Revenue

The adjusted revenue demonstrates a general upward trend over the six-year period. Starting at $50,686 million in 2019, revenue grew steadily each year, reaching a peak of $59,284 million in 2023. However, in 2024, a slight decline is observed with revenue falling to $56,728 million. This indicates strong growth momentum initially, with some deceleration or minor contraction in the most recent year.

Invested Capital

Invested capital remained relatively stable between 2019 and 2023, with values fluctuating modestly from $53,469 million to $58,979 million. In 2024, there is a significant increase, with invested capital rising sharply to $91,785 million. This sudden increase suggests substantial new investments or capital infusion during the latest period, potentially aimed at expansion or restructuring.

Turnover of Capital (TO)

The turnover of capital ratio exhibits variability over the years. Initially around 0.95 in 2019 and 0.96 in 2020, it decreased to 0.9 in 2021 and further to 0.89 in 2022, suggesting a gradual decline in the efficiency with which capital is being used to generate revenue. There was an improvement in 2023, with the ratio increasing to 1.01, indicating higher capital efficiency. However, in 2024, the ratio dropped significantly to 0.62, reflecting a marked decrease in capital turnover relative to previous years, likely influenced by the substantial increase in invested capital that year, without a proportional increase in revenue.

The financial data exhibit several notable trends in the period from July 2019 to July 2024, reflecting variations in operating profit, taxes paid, and tax rates.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT values signify a fluctuating yet generally increasing trend with some periods of decline. From 2019 to 2020, there was a substantial increase from approximately 12.9 billion USD to around 15.6 billion USD. However, in the following year (2021), a decline to about 14.7 billion USD is observed before it rises again in 2022 to approximately 15.4 billion USD and peaks in 2023 at roughly 17.3 billion USD. By 2024, there is a decrease to approximately 15.0 billion USD, indicating some volatility in operating profit performance over the analyzed period.

Cash Operating Taxes

Cash operating taxes generally mirror the fluctuations seen in operating profits but with less consistency. Starting at approximately 3.2 billion USD in 2019, taxes dropped to around 2.7 billion USD in 2020 despite the increase in NOPBT, suggesting favorable tax conditions or benefits in that year. Taxes rose again in 2021 and 2022 but showed a significant increase to about 4.7 billion USD in 2023, coinciding with the peak in operating profit. In 2024, taxes decreased markedly to approximately 2.8 billion USD, which despite the drop in NOPBT, indicates a relatively lower tax burden compared to prior years.

Effective Cash Tax Rate (CTR)

The effective cash tax rate reveals variability with a downward trend interrupted by spikes. It fell from nearly 25% in 2019 to a low of around 17.4% in 2020, indicating a more favorable tax position despite increasing profits. The rate then increased again over the next three years, reaching a peak of approximately 27.06% in 2023, suggesting potentially higher tax expenses linked to the peak operating profits of that year. In 2024, the rate declined substantially to 18.88%, illustrating a significant decrease in the effective rate despite a reduction in profits.

Overall, the period analyzed shows that while operating profits have generally increased, cash taxes and tax rates have exhibited volatility, occasionally moving inversely to profit trends. The fluctuations in the effective tax rate may reflect changes in tax planning, regulatory environments, or other external factors impacting tax liabilities. The significant spike in cash operating taxes and tax rate in 2023, alongside peak profitability, is noteworthy. The subsequent decline in 2024 suggests an adjustment in tax planning or fiscal impacts. These patterns highlight the importance of tax strategy in managing net profitability over the years.