Diamondback Energy Inc. (NASDAQ:FANG)

Return on Assets (ROA)

The return on assets exhibited a fluctuating trend over the five-year period. It started at 6.21% in 2017 and decreased steadily to 1.02% by 2019. There was a significant decline in 2020, resulting in a negative ROA of -25.64%. However, the metric demonstrated a strong recovery in 2021, rising to 9.53%, which surpassed the initial 2017 level.

Financial Leverage

Financial leverage showed a gradual increase from 1.48 in 2017 to a peak of 2 in 2020, indicating a rising reliance on debt financing during this period. In 2021, leverage decreased slightly to 1.89, suggesting a modest reduction in financial risk or debt levels.

Return on Equity (ROE)

The return on equity followed a pattern similar to ROA, with an initial decline from 9.18% in 2017 to 1.81% in 2019. A drastic drop was observed in 2020, with ROE falling to -51.36%, reflecting potential major losses or negative equity returns during that year. A substantial rebound occurred in 2021, with ROE increasing to 18.05%, surpassing all prior recorded values in this timeframe.

Net Profit Margin

The net profit margin showed a strong performance in 2017 and 2018, remaining above 39%. However, a sharp decline was observed in 2019, dropping to just above 6%, followed by a significant negative margin in 2020, indicating substantial losses. In 2021, the margin rebounded to a positive 32.34%, reflecting a recovery in profitability.

Asset Turnover

Asset turnover experienced some fluctuations over the period. It declined from 0.15 in 2017 to 0.10 in 2018, recovered slightly to 0.17 in 2019, and held relatively steady at 0.16 in 2020. A notable increase was observed in 2021, reaching 0.29, suggesting improved efficiency in utilizing assets to generate revenue.

Financial Leverage

Financial leverage showed an upward trend from 1.48 in 2017 to 2.00 in 2020, indicating an increasing reliance on debt financing. A slight decrease to 1.89 occurred in 2021, but the company remained more leveraged compared to the initial years.

Return on Equity (ROE)

Return on equity followed a downward trend from 9.18% in 2017 to a marginal 1.81% in 2019, before plunging into a significant negative figure of -51.36% in 2020, consistent with the period of negative profitability. A strong recovery was evident in 2021, with ROE improving to 18.05%, exceeding the levels seen at the beginning of the period.

Tax Burden

The tax burden ratio shows a declining trend over the observed periods, decreasing from 1.04 in 2017 to 0.78 in 2021, with a missing value in 2020. This indicates a reduction in the proportion of income paid as tax, potentially reflecting changes in tax strategy or tax environment.

Interest Burden

The interest burden remained relatively stable in 2017, 2018, and 2021 at around 0.92-0.94, but there was a significant decrease in 2019 to 0.63 with a missing data point for 2020. This suggests a temporary increase in interest expenses or financial costs during 2019, which was later reversed.

EBIT Margin

The EBIT margin exhibited considerable volatility. It rose from 42.26% in 2017 to a peak of 51.25% in 2018, followed by a drastic decline to 11.73% in 2019 and a severe negative margin of -196.88% in 2020. The margin then recovered to 44.49% in 2021. This pattern indicates significant operational challenges in 2019 and 2020, potentially due to adverse market conditions or extraordinary expenses.

Asset Turnover

Asset turnover demonstrated variability with a decrease from 0.15 in 2017 to 0.10 in 2018, followed by a gradual increase to 0.29 by 2021. This suggests improvements in the efficiency of asset utilization to generate revenue, particularly in the later years.

Financial Leverage

Financial leverage increased consistently from 1.48 in 2017 to a peak of 2.0 in 2020, before slightly declining to 1.89 in 2021. This indicates a trend towards greater use of debt financing over the period, potentially increasing financial risk.

Return on Equity (ROE)

ROE showed a downward trend from 9.18% in 2017 to just 1.81% in 2019, followed by a sharp negative return of -51.36% in 2020. This was succeeded by a strong rebound to 18.05% in 2021. The fluctuations reflect substantial variations in profitability and shareholder returns, likely influenced by the operating losses and financial conditions experienced during 2019 and 2020.

Net Profit Margin

The net profit margin showed a strong performance in the initial years, with values above 39% in 2017 and 2018. However, there was a significant decline in 2019 to 6.17%, followed by a dramatic negative margin of -163.9% in 2020. The margin recovered in 2021 to 32.34%, indicating a return to profitability but not yet reaching the levels seen before 2019.

Asset Turnover

The asset turnover ratio exhibited some fluctuations over the period. It started at 0.15 in 2017, decreased to 0.1 in 2018, then rose again to 0.17 in 2019. The ratio slightly declined to 0.16 in 2020 but saw a notable increase to 0.29 in 2021. This trend suggests improving efficiency in generating sales from assets, particularly in the last year measured.

Return on Assets (ROA)

ROA followed a downward trajectory from 6.21% in 2017 to 1.02% in 2019, reflecting diminishing profitability relative to asset base. In 2020, ROA plunged sharply to -25.64%, mirroring the severe challenges faced that year. A marked recovery occurred in 2021, with ROA rising to 9.53%, surpassing the performance of earlier years except for 2017.

Overall Analysis

The data reveals a period of significant financial stress in 2020, marked by negative profitability and adverse returns on assets. Despite these setbacks, key indicators improved considerably in 2021, recovering profitability and efficiency. The increase in asset turnover in 2021 underscores enhanced operational effectiveness. The fluctuations highlight volatility in profitability and asset utilization, possibly influenced by external market conditions or internal strategic shifts during the observed timeframe.

The analysis of the annual financial ratios reveals several notable trends over the observed period.

Tax Burden

The tax burden ratio exhibited a declining trend from 1.04 in 2017 to 0.78 in 2021, with a slight fluctuation in the intermediate years. The ratio dropped notably between 2017 and 2018 and continued to decrease gradually, indicating a potential reduction in the effective tax rate or changes in taxable income.

Interest Burden

The interest burden ratio remained relatively stable around 0.92-0.94 for most years, with an exception in 2019 when it decreased significantly to 0.63. This deviation suggests an increased interest expense or reduced earnings before interest and taxes during that year, impacting the company’s operational efficiency in relation to debt servicing.

EBIT Margin

The EBIT margin showed substantial volatility. Starting from 42.26% in 2017, it peaked at 51.25% in 2018 but sharply declined to 11.73% in 2019. A dramatic negative margin of -196.88% was observed in 2020, indicating a severe operational loss, likely due to extraordinary circumstances or impairments. The margin recovered to 44.49% in 2021, aligning close to earlier stable values.

Asset Turnover

The asset turnover ratio fluctuated within a narrow range initially, falling from 0.15 in 2017 to 0.10 in 2018, then rising to 0.17 in 2019 and slightly falling to 0.16 in 2020. A marked improvement was visible in 2021, with the ratio increasing to 0.29, indicating enhanced efficiency in using assets to generate revenue.

Return on Assets (ROA)

ROA mirrored the fluctuations seen in EBIT margin and other profitability measures. It declined from 6.21% in 2017 to 3.92% in 2018, and further to 1.02% in 2019. The return sharply deteriorated into negative territory at -25.64% in 2020, reflecting substantial losses. In 2021, ROA rebounded to 9.53%, the highest within the period, demonstrating a recovery in asset profitability and operational performance.

Overall, the data reflects significant operational challenges and recovery phases over the five-year span, highlighted by a severe downturn in 2020 and a strong rebound in 2021. Improvements in asset turnover and profitability metrics in the final year suggest better utilization of assets and operational stabilization following the period of exceptional losses.

Tax Burden

The tax burden ratio showed a declining trend over the analyzed periods, starting at 1.04 in 2017 and decreasing to 0.78 in 2021. This reduction suggests the company experienced a relatively lower tax impact on its earnings over time. However, the 2020 value is missing, preventing a continuous observation across all years.

Interest Burden

The interest burden ratio remained relatively stable around 0.92 to 0.94 in 2017, 2018, and 2021, with a notable decrease to 0.63 in 2019. This dip in 2019 indicates a significant increase in interest expenses relative to earnings before interest and taxes for that year. Data for 2020 is unavailable, limiting further analysis for that period.

EBIT Margin

The EBIT margin exhibited considerable volatility throughout the period. It increased from 42.26% in 2017 to a peak of 51.25% in 2018, followed by a sharp decline to 11.73% in 2019. A dramatic negative margin of -196.88% occurred in 2020, indicating substantial operating losses, before recovering to 44.49% in 2021. This pattern reflects a period of significant financial distress in 2020, with a subsequent strong rebound.

Net Profit Margin

The net profit margin trend mirrored the EBIT margin, starting at 40.65% in 2017 and slightly decreasing to 39.71% in 2018. It then fell steeply to 6.17% in 2019 and plummeted to a deep negative margin of -163.9% in 2020. By 2021, the margin improved to 32.34%, indicating partial recovery but remaining below earlier peak levels. The data highlights a critical downturn in profitability in 2020, followed by a notable recovery phase.