Costco Wholesale Corp. (NASDAQ:COST)

Return on Assets (ROA)

The Return on Assets showed a generally upward trend over the analyzed periods. Starting at 8.06% in September 2019, it experienced a slight decline to 7.2% in August 2020, followed by consistent increases thereafter. By September 2024, ROA had reached 10.55%, indicating improved efficiency in asset utilization over time.

Financial Leverage

Financial Leverage exhibited some fluctuations during the timeline. It began at a ratio of 2.98 in 2019 and increased to a peak of 3.37 in 2021. After this peak, there was a decline to 2.75 in 2023, followed by a slight rise to 2.96 in 2024. Overall, the leverage ratio remained relatively stable but trended toward moderate reduction after 2021, suggesting a cautious approach to debt financing.

Return on Equity (ROE)

Return on Equity presented variable movement throughout the periods. ROE started at 24% in 2019, dipped to 21.89% in 2020, then surged to 28.51% in 2021 and maintained high levels in 2022 (28.31%). In 2023, it declined to 25.11% before rising sharply to 31.19% in 2024, marking the highest level in the timeframe. This pattern indicates enhanced profitability relative to shareholder equity, with a notable peak in the most recent period.

Net Profit Margin

The net profit margin exhibited relative stability from 2019 through 2020, maintaining a value of 2.45%. From 2021 onward, it demonstrated a consistent upward trend, increasing gradually each year and reaching 2.95% in 2024. This indicates an improvement in the company’s ability to convert revenue into profit over the observed period.

Asset Turnover

Asset turnover experienced a decline in 2020, dropping from 3.29 to 2.94. Subsequently, it reversed this trend, showing growth in 2021, and continued to rise steadily through 2024, ultimately reaching 3.57. The pattern suggests improved efficiency in using assets to generate sales, especially after the initial dip in 2020.

Financial Leverage

Financial leverage increased slightly from 2.98 in 2019 to 3.04 in 2020, then rose more sharply in 2021 to 3.37. After 2021, the ratio declined steadily, reaching its lowest point at 2.75 in 2023 before a moderate increase to 2.96 in 2024. This pattern may reflect efforts to optimize the balance between debt and equity financing, with a focus on reducing leverage after 2021.

Return on Equity (ROE)

ROE dropped from 24.00% in 2019 to 21.89% in 2020, indicating lower profitability relative to shareholder equity during that period. It then increased significantly to 28.51% in 2021 and remained relatively stable in 2022 at 28.31%. A decrease to 25.11% occurred in 2023, followed by a noticeable rise to 31.19% in 2024. Overall, the trend points to enhanced effectiveness in generating returns for shareholders, particularly in the most recent year.

Tax Burden

The tax burden ratio exhibits a relatively stable pattern, fluctuating slightly between 0.74 and 0.78 over the observed periods. This indicates consistent tax efficiency without significant changes in the company’s effective tax rate.

Interest Burden

The interest burden ratio remains stable around 0.97 to 0.98, suggesting that the company's EBIT is consistently high relative to its earnings before taxes and interest expenses. This stability indicates controlled interest expenses relative to operating earnings.

EBIT Margin

There is a gradual upward trend in the EBIT margin, increasing from 3.26% in 2019 to 3.97% in 2024. This improvement reflects enhanced operating profitability, implying better management of operating costs or higher operational efficiencies over time.

Asset Turnover

The asset turnover ratio shows some variability but an overall increasing trend, moving from 3.29 in 2019 to 3.57 in 2024. This suggests improved efficiency in using assets to generate revenue, particularly after a dip in 2020, followed by recovery and growth.

Financial Leverage

Financial leverage fluctuates during the periods, peaking at 3.37 in 2021, then decreasing to 2.75 in 2023, and slightly rebounding to 2.96 in 2024. This indicates a shifting approach to debt and equity financing, with a reduction in leverage suggesting a more conservative capital structure in recent years.

Return on Equity (ROE)

The ROE experiences some volatility but shows an overall increasing trend, rising from 24% in 2019 to 31.19% in 2024, despite a dip in certain years such as 2020 and 2023. The upward trajectory reflects improved profitability and efficiency in generating returns from shareholders’ equity.

Net Profit Margin

The net profit margin has demonstrated a steady upward trend over the period analyzed. Starting at 2.45% in 2019 and maintaining this level through 2020, it then gradually increased each subsequent year, reaching 2.95% in 2024. This indicates an improving efficiency in converting revenue into actual profit, suggesting enhanced cost control or revenue quality over time.

Asset Turnover

The asset turnover ratio displayed some fluctuations but overall showed positive momentum. It declined from 3.29 in 2019 to 2.94 in 2020 before rebounding strongly to 3.24 in 2021. The ratio continued to increase, peaking at 3.57 in 2024. This progression signifies an improving ability to generate sales from assets, reflecting potentially more effective asset utilization or operational efficiency improvements.

Return on Assets (ROA)

Return on assets exhibited consistent growth throughout the evaluation period. After a dip from 8.06% in 2019 to 7.2% in 2020, ROA increased steadily each year thereafter, culminating at 10.55% in 2024. This upward trajectory signals enhanced profitability relative to the asset base, combining the effects of both better profit margins and more efficient asset use.

The analysis of the annual financial data reveals several key trends in the company's operational efficiency and profitability over the examined periods.

Tax Burden

The tax burden ratio has remained relatively stable, fluctuating slightly between 0.74 and 0.78. This suggests consistent tax expenses relative to earnings before tax, with minor variations that do not indicate significant changes in the company's effective tax rate.

Interest Burden

The interest burden ratio has been steady, consistently around 0.97 to 0.98 across all periods. This stability implies the company maintained a consistent level of interest expenses relative to earnings before interest and taxes, indicating predictable financing costs.

EBIT Margin

There is a clear upward trend in the EBIT margin, increasing from 3.26% in 2019 to 3.97% in 2024. This reflects improving operational efficiency and profitability before interest and tax expenses, suggesting enhanced cost control or higher revenue quality over the years.

Asset Turnover

Asset turnover shows some variability, declining from 3.29 in 2019 to 2.94 in 2020, possibly reflecting an initial dip in asset utilization. However, it subsequently recovered, rising to 3.57 by 2024. This indicates an overall improvement in the company's efficiency at generating sales from its asset base in more recent periods.

Return on Assets (ROA)

ROA demonstrates a positive trajectory, starting at 8.06% in 2019, dipping slightly in 2020 to 7.2%, and then consistently increasing up to 10.55% in 2024. The increase corroborates the improvements observed in the EBIT margin and asset turnover, signifying enhanced profitability relative to the company's asset investments.

In summary, the company exhibits stability in tax and interest burdens, alongside notable improvements in operational efficiency as evidenced by increasing EBIT margins and asset turnover ratios in recent years. These factors collectively contribute to a strengthened return on assets, indicating efficient management and effective utilization of resources to generate higher earnings.

Tax Burden

The tax burden ratio has shown minor fluctuations over the observed periods, ranging narrowly between 0.74 and 0.78. Initially, it decreased from 0.78 in 2019 to 0.75 in 2020, then remained relatively stable through 2023 around 0.74-0.75, before slightly increasing again to 0.76 in 2024. This indicates a consistent ratio of income retained after taxes without significant volatility.

Interest Burden

The interest burden ratio has remained stable and high across all periods, consistently at 0.97 to 0.98. There is a slight upward movement observed from 0.97 in earlier years to 0.98 from 2022 onwards, reflecting consistent management of interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin has exhibited a gradual but steady increase throughout the years. Starting at 3.26% in 2019, the margin rose incrementally each year, reaching 3.97% by 2024. This positive trend suggests improving operational efficiency or favorable business conditions that contribute to stronger earnings before interest and taxes relative to revenue.

Net Profit Margin

The net profit margin has similarly shown consistent growth. It held steady at 2.45% in 2019 and 2020, then experienced gradual increases in subsequent years, reaching 2.95% in 2024. This improvement implies enhanced overall profitability, considering all expenses and taxes, and could be attributed to better cost control, increased revenues, or other operational improvements.