Costco Wholesale Corp. (NASDAQ:COST)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes showed an overall upward trend from 2019 to 2024, with an increase from $3,979 million in 2019 to $7,032 million in 2024. Notably, there was a substantial rise between 2020 and 2022, where NOPAT grew from $4,254 million to $6,421 million. However, a decline was observed in 2023, dropping to $5,694 million before rebounding in 2024.

Cost of Capital

The cost of capital exhibited a gradual but consistent increase throughout the period under review. Starting at 12.15% in 2019, it rose each year without exception, reaching 12.57% in 2024. This upward trend suggests a steadily increasing hurdle rate for investments.

Invested Capital

The invested capital demonstrated variability with an overall increasing tendency over the years. From $23,959 million in 2019, it peaked at $34,903 million in 2023 before slightly decreasing to $32,993 million in 2024. The year 2020 saw a sharp increase to $29,043 million, followed by a slight dip in 2021, and then recovery and growth thereafter.

Economic Profit

The economic profit fluctuated considerably during the observed years. It started at $1,068 million in 2019, dropped to $744 million in 2020, then sharply increased to $1,810 million in 2021 and further to $2,523 million in 2022. A decline occurred in 2023 to $1,363 million, followed by a significant recovery to $2,885 million in 2024. These fluctuations reflect the combined effects of changes in NOPAT, cost of capital, and invested capital.

Summary of Trends

Overall, the company experienced growth in net operating profit and invested capital over the six-year period, although with some years showing declines or slower growth. The cost of capital increased steadily, potentially indicating higher funding costs or risk perceptions. Economic profit showed volatility but generally increased, indicating an improving margin over the cost of capital in later years. The year 2023 represents a noticeable dip in profitability measures, which was followed by a recovery in 2024. These patterns suggest dynamic operational and investment conditions impacting profitability and capital efficiency.

Net income attributable to Costco

The net income demonstrates a consistent upward trend over the six-year period. Starting at 3,659 million USD in 2019, it increased steadily each year, reaching 7,367 million USD by 2024. The growth is particularly notable between 2023 and 2024, showing a substantial increase of approximately 17%. This pattern indicates continuous improvement in profitability and effective management in generating earnings for shareholders.

Net operating profit after taxes (NOPAT)

NOPAT also shows a general upward trajectory, reflecting enhanced operational efficiency and after-tax profitability. The figure rose from 3,979 million USD in 2019 to 7,032 million USD in 2024. However, a deviation from the growth trend is observed between 2022 and 2023, where NOPAT declined from 6,421 million USD to 5,694 million USD, representing a decrease of about 11%. Despite this dip, the metric recovered strongly in 2024, exceeding previous highs. This suggests a temporary operational challenge in 2023, followed by a robust rebound.

The financial data indicates a consistent upward trend in both the provision for income taxes and cash operating taxes over the six-year period examined.

Provision for income taxes

This item shows a steady increase each year, starting at 1,061 million US dollars in 2019 and rising to 2,373 million US dollars by 2024. The growth is relatively smooth and continuous, reflecting an increasing tax burden or improved profitability subject to taxation during this period.

Cash operating taxes

Similar to the provision for income taxes, cash operating taxes exhibit a continuous rise from 944 million US dollars in 2019 to 2,412 million US dollars in 2024. The increase each year is consistent with growing operational tax payments, slightly exceeding the provision figures each year, which might indicate timely cash outflows related to tax obligations.

The parallel progression of both tax-related metrics suggests a stable and possibly expanding operational base contributing to higher taxable income and ensuing tax payments. The close alignment between provision and cash operating taxes implies effective tax management with minimal discrepancies between accrued and paid taxes over the period.

The analysis of the annual financial data reveals several notable trends over the six-year period.

Total reported debt & leases

This liability metric shows a moderate fluctuation, beginning at $9,126 million in 2019, peaking in 2021 at $11,407 million, and then generally declining to $9,949 million by 2024. This suggests a strategy of managing and reducing debt levels following a peak in 2021, potentially improving the company's leverage position.

Total Costco stockholders’ equity

This equity measure exhibits a consistent upward trend overall. Starting at $15,243 million in 2019, it rises significantly to $25,058 million by 2023 before declining somewhat to $23,622 million in 2024. The growth in stockholders’ equity indicates accumulation of retained earnings and possible capital infusions over these years, although the slight decrease in the final year may warrant further review.

Invested capital

Invested capital mirrors the combined effect of liabilities and equity, showing an overall increases from $23,959 million in 2019 to a peak of $34,903 million in 2023, followed by a decrease to $32,993 million in 2024. This pattern reflects growth in the total capital invested in the business up to 2023, with some withdrawal or reduction in the most recent year.

Overall, the data suggests strengthened equity position alongside careful debt management, with a general trend of growth in invested capital that slightly recedes in the final year observed. These patterns could indicate strategic financial adjustments aimed at optimizing capital structure and supporting company growth.

Economic profit

Economic profit demonstrated significant fluctuations over the observed periods. The value started at 1068 million USD in 2019 and declined notably to 744 million USD in 2020. This was followed by a strong recovery and an upward trend, reaching 1810 million USD in 2021 and further increasing to 2523 million USD in 2022. A dip occurred in 2023 with economic profit dropping to 1363 million USD, before accelerating sharply to the highest level of 2885 million USD in 2024. These variations suggest periods of both recovery and volatility, with an overall substantial growth by the end of the period.

Invested capital

Invested capital showed a general upward trend from 2019 through 2023, beginning at 23959 million USD and increasing steadily to peak at 34903 million USD in 2023. However, in 2024, there was a slight decrease to 32993 million USD. This pattern indicates continued investment and asset deployment over the years with only a modest reduction in the final year, possibly reflecting strategic capital reallocation or asset divestiture.

Economic spread ratio

The economic spread ratio displayed considerable variability throughout the periods observed. Starting at 4.46% in 2019, the ratio dropped markedly to 2.56% in 2020, then recovered significantly to 6.35% in 2021. The upward momentum continued with a rise to 7.97% in 2022. A notable decline to 3.9% occurred in 2023, followed by a sharp increase to the period’s highest ratio of 8.75% in 2024. These fluctuations imply changing efficiency or profitability levels relative to invested capital, with notable peaks correlating with higher economic profits in 2022 and 2024.

Analysis of the financial data reveals several notable trends in the company's economic profit, net sales, and economic profit margin over the observed periods.

Economic Profit

The economic profit exhibited considerable fluctuations across the years. Beginning at $1,068 million in 2019, it decreased to $744 million in 2020, which could be attributed to external economic conditions or operational challenges. A strong rebound occurred in 2021 and 2022, with values increasing to $1,810 million and $2,523 million respectively, indicating enhanced profitability and possibly improved operational efficiency. However, in 2023, economic profit declined sharply to $1,363 million, followed by a significant rise to $2,885 million in 2024, achieving the highest value in the period under review.

Net Sales

Net sales demonstrated a consistent upward trajectory throughout the entire span. Starting at $149,351 million in 2019, sales increased year-over-year to reach $249,625 million by 2024. This steady growth implies successful top-line expansion, likely from increased market demand, effective sales strategies, or expansion of product lines.

Economic Profit Margin

The economic profit margin shows variability that mirrors fluctuations in economic profit. Initially, it was 0.71% in 2019, declining to a low of 0.46% in 2020. The margin then improved substantially in 2021 and 2022 to 0.94% and 1.13% respectively, reflecting improved profitability relative to sales. In 2023, the margin again dropped to 0.57%, coinciding with the drop in economic profit, but it sharply increased to 1.16% in 2024, the highest margin recorded during the period.

Overall, while net sales have shown consistent growth, economic profit and its margin have exhibited more pronounced volatility. Periods of decline in profitability metrics are followed by strong recoveries, suggesting cyclical performance trends or responses to external market conditions. The strong performance in 2024, both in absolute economic profit and margin, indicates a period of effective cost management or value creation relative to sales volume.