Costco Wholesale Corp. (NASDAQ:COST)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrates an overall increasing trend over the analyzed periods, rising from 3,979 million USD in 2019 to 7,032 million USD in 2024. There was a noticeable incremental growth each year except for a decline in 2023, where NOPAT decreased to 5,694 million USD from 6,421 million USD the previous year. This suggests a generally improving operational profitability, albeit with a setback in 2023.

Cost of Capital

The cost of capital shows a gradual upward trend, increasing from 12.22% in 2019 to 12.64% in 2024. The cost rose steadily each year without any declines, indicating a consistently increasing expense associated with financing and investment risk over time.

Invested Capital

Invested capital increased from 23,959 million USD in 2019, reaching a peak of 34,903 million USD in 2023. In 2024, however, it declined to 32,993 million USD. The overall trend is upward, reflecting growth in the company's capital investment over the period, although the decline in the final year may suggest divestitures, reduced investments, or capital efficiency efforts.

Economic Profit

Economic profit exhibited variation throughout the years, beginning at 1,051 million USD in 2019, declining to 723 million USD in 2020, then substantially increasing to 1,790 million USD in 2021 and 2,500 million USD in 2022. A significant drop occurred in 2023 to 1,338 million USD, followed by a pronounced recovery to 2,861 million USD in 2024. This fluctuating pattern mirrors changes in profitability relative to the cost of capital and invested capital, indicating periods of both enhanced and reduced value creation by the company.

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.

The analysis of the economic profit, invested capital, and economic spread ratio over the observed periods reveals several notable trends and insights.

Economic Profit

The economic profit exhibits significant fluctuations throughout the periods. Starting at $1,051 million in 2019, it declined to $723 million in 2020, suggesting a challenging operational or market environment during that year. However, there was a strong recovery and growth in 2021 and 2022, reaching $1,790 million and $2,500 million respectively. A decrease to $1,338 million in 2023 indicates a temporary setback, followed by a substantial rebound to $2,861 million in 2024, the highest level observed. This pattern demonstrates the company's capacity to generate increasing economic profit over the medium term, despite intermittent volatility.

Invested Capital

Invested capital shows an overall upward trajectory with some variability. It increased from $23,959 million in 2019 to $29,043 million in 2020, reflecting expansion or increased capital deployment. The figure slightly declined to $28,508 million in 2021 but then rose consistently to peak at $34,903 million in 2023 before a moderate reduction to $32,993 million in 2024. This suggests ongoing investment activities with periodic adjustments, possibly related to strategic asset management or capital efficiency measures.

Economic Spread Ratio

The economic spread ratio, representing returns relative to cost of capital, has been volatile yet generally exhibits an increasing trend. Beginning at 4.39% in 2019, it declined significantly to 2.49% in 2020, hinting at reduced profitability or increased costs during that period. A marked improvement followed in 2021 and 2022, reaching 6.28% and 7.89%, respectively, indicating enhanced value creation. Although a drop to 3.83% occurred in 2023, the ratio peaked at 8.67% in 2024, the highest point in the dataset, suggesting stronger economic returns relative to the invested capital's cost.

Overall, the data indicates a generally positive trend in economic profitability and efficiency, despite short-term fluctuations. The company's invested capital has grown over time, supporting expanded operations, while the economic spread ratio improvements imply increasing effectiveness in capital utilization and value generation. The temporary declines observed in 2020 and 2023 might reflect external challenges or internal adjustments, but the subsequent recoveries highlight resilience and strategic adaptability.

Net Sales

Net sales demonstrate a consistent upward trajectory over the analyzed periods. Beginning at $149,351 million in 2019, net sales increased steadily each year to reach $249,625 million by 2024. This reflects a growth of approximately 67% over the six-year span, indicating robust revenue expansion.

Economic Profit

Economic profit exhibits notable variability across the years. Starting at $1,051 million in 2019, it peaked at $2,500 million in 2022 before dipping to $1,338 million in 2023 and then rising sharply to $2,861 million in 2024. This pattern indicates fluctuations in the company's ability to generate profit above its cost of capital, with particularly strong performance in 2022 and 2024.

Economic Profit Margin

The economic profit margin follows a somewhat volatile trend. It begins at 0.7% in 2019, decreases to 0.44% in 2020, then improves to 0.93% in 2021 and reaches 1.12% in 2022. A decline to 0.56% occurs in 2023, followed by a recovery to 1.15% in 2024. The margins indicate varying efficiency in converting sales into economic profit, with higher margins in 2022 and 2024 aligning with peaks in economic profit.

Overall Analysis

Overall, the data reveal steady revenue growth alongside fluctuations in profitability measures. The peaks in economic profit and its margin in 2022 and 2024 suggest periods of enhanced operational efficiency or favorable market conditions. The declines observed in 2020 and 2023 indicate challenges in maintaining economic profit despite increasing net sales. The upward trend in net sales is a positive indicator, but the variability in economic profit and its margin suggests that profit generation relative to sales and capital costs is subject to changing factors that may affect sustainable profitability.