Costco Wholesale Corp. (NASDAQ:COST)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes has shown a generally upward trend over the analyzed periods, starting at $3,979 million in September 2019 and reaching $7,032 million by September 2024. There was continuous growth year-over-year except for a slight decline in 2023 compared to 2022, where NOPAT decreased from $6,421 million to $5,694 million before increasing again in 2024.

Cost of Capital

The cost of capital remained relatively stable, with a slow but consistent increase from 12.05% in 2019 to 12.46% in 2024. This slight upward movement suggests a marginal increase in the company's required rate of return over the six-year span.

Invested Capital

Invested capital generally increased from $23,959 million in 2019 to a peak of $34,903 million in 2023. However, in 2024, there was a decrease to $32,993 million, indicating a possible reduction in asset investment or capital deployment in the most recent year.

Economic Profit

Economic profit shows more variability compared to other metrics. It began at $1,092 million in 2019, dropped to $773 million in 2020, then increased significantly to $2,556 million in 2022 before falling again to $1,399 million in 2023. Notably, it rebounded sharply to $2,920 million in 2024, representing the highest economic profit within the timeframe. This pattern suggests fluctuations in value creation relative to the cost of capital, with periods of both expansion and contraction in economic profitability.

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

The economic profit experienced fluctuations over the observed periods. Initially, there was a decline from 1,092 million US dollars in 2019 to 773 million in 2020. Subsequently, a significant increase occurred, reaching a peak of 2,556 million in 2022. However, the following year showed a drop to 1,399 million, before rising sharply to 2,920 million in 2024, indicating considerable volatility but an overall upward trend.

Invested Capital

Invested capital generally followed an upward trajectory from 23,959 million US dollars in 2019 to a peak of 34,903 million in 2023. Notably, there was a slight contraction in 2024 to 32,993 million. This pattern suggests ongoing investment growth with a minor recent reduction.

Economic Spread Ratio

The economic spread ratio showed variability across the years. It decreased from 4.56% in 2019 to 2.66% in 2020, followed by an increase to 8.07% in 2022. A notable decline occurred in 2023, dropping to 4.01%, with a subsequent rise to 8.85% in 2024. This pattern indicates fluctuating profitability margins relative to invested capital, with the highest spread occurring in the final period.

Overall Analysis

There is a clear pattern of cyclical performance in economic profit and economic spread ratio, pointing to periods of both contraction and expansion in profitability efficiency. Invested capital shows a generally rising trend, implying sustained capital allocation and growth efforts despite minor recent retrenchment. The divergence between the economic profit and invested capital in the final period suggests improved capital utilization or enhanced economic returns.

Economic Profit

The economic profit exhibited notable fluctuations throughout the observed periods. Starting at $1,092 million in 2019, it declined to $773 million in 2020, indicating a significant decrease. Subsequently, the economic profit saw a strong recovery and growth, reaching $1,839 million in 2021 and further increasing to $2,556 million in 2022. In 2023, there was another decline to $1,399 million before a substantial rebound to $2,920 million in 2024, marking the highest value in the dataset. This pattern suggests periods of volatility with an overall upward trend by the end of the period.

Net Sales

Net sales demonstrated consistent and steady growth over the six years. Starting from $149,351 million in 2019, net sales increased every year without any decline, reaching $249,625 million in 2024. The incremental yearly increases reflect robust revenue growth and expanding operations throughout the period without interruption.

Economic Profit Margin

The economic profit margin followed a pattern similar to that of economic profit values but with smaller scale fluctuations. Beginning at 0.73% in 2019, the margin declined to 0.47% in 2020, reflecting reduced profitability relative to net sales during that year. It then improved to 0.96% in 2021 and climbed to a peak of 1.15% in 2022. In 2023, the margin dropped to 0.59%, before rebounding to 1.17% in 2024, the highest margin recorded in this timeframe. These movements suggest that profitability relative to sales experienced variability but tended to strengthen in the latest period analyzed.