DexCom Inc. (NASDAQ:DXCM)

Net Operating Profit After Taxes (NOPAT)

The company exhibited a significant improvement in NOPAT from 2018 to 2020, transitioning from a negative figure of -115,440 thousand USD in 2018 to a positive 294,086 thousand USD in 2020. Although there was a decline in 2021 to 233,041 thousand USD, NOPAT rebounded in 2022 to reach the highest value in the observed period at 352,450 thousand USD. This indicates an overall upward trend in profitability despite some fluctuation.

Cost of Capital

The cost of capital remained relatively stable over the five-year period, fluctuating slightly between 15.28% and 15.59%. The highest rate was observed in 2020 at 15.59%, with a gradual decrease thereafter to 15.28% in 2022. This stability suggests a consistent risk and return profile from the perspective of capital providers.

Invested Capital

Invested capital displayed notable variability. Starting at 1,449,197 thousand USD in 2018, it sharply decreased to 836,300 thousand USD in 2019, followed by an increase to 1,367,200 thousand USD in 2020. The upward trend continued into 2021, peaking at 1,899,300 thousand USD, before decreasing again in 2022 to 1,649,000 thousand USD. These movements indicate fluctuating investment levels, which may reflect changes in asset base or operational scaling.

Economic Profit

Economic profit showcased considerable volatility over the period. It was significantly negative in 2018 at -337,385 thousand USD, turned positive in 2019 at 21,102 thousand USD, and increased further to 80,905 thousand USD in 2020. However, economic profit dropped back into negative territory in 2021, recording -58,909 thousand USD, before recovering to 100,543 thousand USD in 2022. This pattern reveals periods where the company generated returns exceeding its cost of capital, interspersed with intervals where returns fell short, highlighting challenges in consistently achieving value creation.

The financial data over the five-year period reveals several notable trends in profitability metrics.

Net Income (Loss)

The net income (loss) shows a significant transition from a negative figure in 2018 to positive values in subsequent years. In 2018, the company reported a net loss of approximately US$127.1 million. In 2019, net income turned positive, reaching US$101.1 million, indicating a substantial improvement.

The growth trend continued strongly with net income rising to US$493.6 million in 2020, representing the highest value within the observed period. However, in 2021, net income decreased to US$154.7 million, indicating a contraction compared to the previous year. In 2022, net income rebounded materially to US$341.2 million, suggesting recovery and sustained profitability despite some volatility.

Net Operating Profit After Taxes (NOPAT)

The NOPAT data parallels the net income trend but displays some differences in magnitude and yearly variation. In 2018, NOPAT was negative at approximately US$115.4 million, consistent with the net loss reported that year.

From 2019 onward, NOPAT remained positive, increasing from US$150.3 million in 2019 to US$294.1 million in 2020. Unlike net income, NOPAT decreased less sharply in 2021, recording US$233 million, reflecting a smaller decline compared to net income's sharper fall in the same period.

In 2022, NOPAT increased further to US$352.5 million, reaching its highest value during the period and indicating enhanced operational efficiency and profitability after taxes.

Overall, the data suggests the company experienced a turnaround starting in 2019, moving from losses to profits. The peak in profitability occurred in 2020, followed by a decline in 2021, then a recovery in 2022. The NOPAT figures indicate that operational profitability after taxes has generally improved, and although fluctuations exist, the trend is positive, with 2022 reflecting stronger operational results than previous years. These patterns may indicate strategic or operational improvements that influenced earnings performance and operational efficiency over the period.

Provision for (benefit from) income taxes

The provision for income taxes demonstrates considerable volatility over the five-year period. Initially, it was a modest positive figure of 600 thousand US dollars at the end of 2018, increasing significantly to 3,100 thousand US dollars by the end of 2019. In 2020, the provision shifted dramatically to a large tax benefit of -268,600 thousand US dollars, marking a substantial reversal. Following this, the provision reverted to positive values, reporting 19,200 thousand US dollars in 2021 and further rising to 49,600 thousand US dollars in 2022. The notable negative provision in 2020 suggests an exceptional tax event or adjustment during that year.

Cash operating taxes

Cash operating taxes have exhibited a consistent upward trajectory throughout the five years. Starting at 8,239 thousand US dollars in 2018, the cash outflow more than doubled by 2019 to 16,466 thousand US dollars. This trend of increasing cash tax payments continued steadily, reaching 27,729 thousand US dollars in 2020, 46,414 thousand US dollars in 2021, and finally 76,556 thousand US dollars in 2022. The persistent growth in cash operating taxes indicates increasing taxable income or changes in tax policy resulting in higher cash tax obligations.

The financial data over the five-year period reveals several notable trends in the company’s debt, equity, and invested capital.

Total Reported Debt & Leases

This metric shows a consistent upward trend, increasing from approximately $1.08 billion in 2018 to about $2.15 billion in 2022. The most significant jump occurs between 2019 and 2020, where the debt rose by roughly 59%, then continued growing at a steadier pace through 2022. This indicates increasing leverage and possibly expanding financing commitments or capital expenditures funded by debt.

Stockholders’ Equity

Stockholders’ equity also experienced growth from 2018 through 2021, rising sharply from approximately $663 million to $2.25 billion. However, in 2022, equity declined by around 5% to approximately $2.13 billion. The substantial increase up to 2021 suggests successful retention of earnings or capital infusion, while the slight downturn in 2022 might point to losses, dividend payments, or other equity-reducing transactions during that year.

Invested Capital

Invested capital demonstrates a more volatile pattern over the period. After starting at about $1.45 billion in 2018, it dropped substantially by 2019 to $836 million, a decrease of over 40%. This was followed by a recovery and growth to approximately $1.9 billion in 2021, before declining again to $1.65 billion in 2022. These fluctuations could reflect changes in the mix of debt and equity financing, asset acquisitions or disposals, or shifts in working capital components.

Overall, the data indicates increasing reliance on debt with growing total reported debt and leases, balanced by a rise in equity up to 2021. The fluctuations in invested capital suggest dynamic capital management strategies, potentially responding to operational needs or market conditions. The slight decline in equity and invested capital in 2022 may warrant further analysis to determine underlying causes and implications for financial stability and investment capacity.

Economic Profit

The economic profit exhibited significant fluctuations during the analyzed period. In 2018, the company experienced a substantial economic loss of -337,385 thousand US dollars. This shifted dramatically to a positive economic profit of 21,102 thousand US dollars in 2019, followed by further improvement to 80,905 thousand US dollars in 2020. However, in 2021, the economic profit declined back into negative territory with a loss of 58,909 thousand US dollars, before rebounding strongly to 100,543 thousand US dollars in 2022. This indicates volatility in the company's ability to generate returns above its cost of capital, with notable recoveries after downturns.

Invested Capital

Invested capital shows variability over the years. Starting at 1,449,197 thousand US dollars at the end of 2018, it decreased sharply to 836,300 thousand US dollars in 2019, before rising again to 1,367,200 thousand in 2020. The upward trend continued, peaking at 1,899,300 thousand in 2021, but there was a reduction to 1,649,000 thousand in 2022. These changes suggest active adjustments in capital deployment, potentially in response to strategic initiatives or asset reallocation.

Economic Spread Ratio

The economic spread ratio, representing returns relative to the cost of capital, closely mirrors the economic profit trend. It started strongly negative at -23.28% in 2018, improved to positive territory at 2.52% in 2019, and further increased to 5.92% in 2020. A setback occurred in 2021, with the ratio falling to -3.1%, but a recovery was evident in 2022, rising to 6.1%. The positive economic spread ratios in 2019, 2020, and 2022 indicate periods where the company efficiently generated value exceeding its cost of capital, while the negative values in 2018 and 2021 reflect periods of economic loss.

Overall Analysis

The data exhibits notable volatility in both economic profit and the economic spread ratio, signaling fluctuating operational performance and return on invested capital over the five-year span. The invested capital changes underline strategic capital management, which may influence profitability and economic spreads. Recoveries after years with negative economic profit and spread ratios suggest resilience and potential for value creation when conditions improve. Continuous monitoring and analysis of the factors driving these fluctuations would be essential for informed decision-making.

Adjusted Revenue

The adjusted revenue demonstrates a consistent upward trend over the five-year period, rising from approximately $1.03 billion in 2018 to about $2.92 billion in 2022. This steady growth indicates successful revenue expansion efforts.

Economic Profit

The economic profit exhibits considerable volatility throughout the period. Starting with a significant loss of approximately $337 million in 2018, it turns positive in 2019 and 2020, reaching a peak of around $81 million in 2020. However, the company experienced a setback in 2021 with an economic loss of nearly $59 million, before recovering in 2022 to an economic profit of roughly $100 million. This pattern suggests fluctuations in profitability despite revenue growth.

Economic Profit Margin

The economic profit margin closely mirrors the pattern of economic profit, moving from a negative margin of -32.71% in 2018 to modest positive margins of 1.43% and 4.2% in 2019 and 2020 respectively. It dips back into negative territory at -2.41% in 2021, indicating a decline in profitability relative to revenue. In 2022, it improves to 3.44%, reflecting a restoration of profit relative to revenue. Overall, the margin data underline the fluctuating efficiency in generating economic profit.

Summary

The data show consistent and robust growth in revenue over the five years, while economic profit and its corresponding margin display notable variability. The company managed to achieve economic profitability in three out of five years, with losses concentrated at the beginning and in 2021. These fluctuations point to challenges in managing costs or other expenditures despite increasing sales. The positive turnaround in 2022 suggests improvements in operational performance or cost management.