Etsy Inc. (NASDAQ:ETSY)

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates a consistent upward trend from 2017 to 2021. Starting at $47.6 million in 2017, it more than doubled by 2019 to approximately $103.8 million. A significant surge is observed in 2020, with profit reaching nearly $393.7 million, followed by a slight increase to $413.1 million in 2021. This indicates substantial improvement in operational efficiency and profitability over the five-year period.

Cost of Capital

The cost of capital exhibits a generally decreasing trend during the period under review. It decreased from 20.05% in 2017 to 17.08% in 2021, with minor fluctuations in between. This decline suggests a reduced cost associated with financing the company's investments, potentially reflecting improved creditworthiness or favorable changes in the market interest rates.

Invested Capital

Invested capital shows strong and accelerating growth throughout the years. From $498.8 million in 2017, it increased modestly to $536.5 million in 2018, followed by a sharp rise to $888.2 million in 2019. This upward trajectory continued with $1.49 billion in 2020, reaching $2.84 billion in 2021. The data reflects significant capital investment, indicating expansion initiatives or increased assets base over the period.

Economic Profit

The economic profit displays volatility, with negative values dominating most years. It started with a loss of $52.3 million in 2017, improved to a smaller loss of $29.5 million in 2018, but declined again to a loss of $59.9 million in 2019. There is a notable improvement in 2020 when economic profit turned positive at $100.1 million, suggesting the company generated returns above its cost of capital that year. However, in 2021, economic profit fell back into negative territory at a loss of $72.5 million, indicating that despite higher NOPAT, the cost of capital and invested capital led to value destruction.

Summary of Financial Trends

Over the five-year span, the company has experienced significant growth in operating profit and invested capital, alongside a decreasing cost of capital. However, the recurring negative economic profits, except for the year 2020, imply challenges in generating sufficient returns to exceed the cost of invested capital consistently. The spike in economic profit in 2020 stands out as an anomaly of value creation amidst a general trend of economic value loss, despite rising NOPAT figures. This suggests that while the company has expanded strongly and improved profitability, efficient capital utilization remains an area for attention.

Net Income

The net income demonstrates a generally increasing trend over the five-year period. Initially, the net income registers at 81,800 thousand USD at the end of 2017, followed by a slight decline to 77,491 thousand USD in 2018. From 2018 onwards, there is consistent growth, with net income rising to 95,894 thousand USD in 2019. This growth accelerates significantly in 2020, reaching 349,246 thousand USD, and continues to increase substantially in 2021, amounting to 493,507 thousand USD. The sharp increase during 2020 and 2021 indicates a notable improvement in profitability.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures also show a positive trajectory throughout the period. Starting at 47,642 thousand USD in 2017, NOPAT rises to 76,568 thousand USD in 2018, reflecting an increase in operating efficiency or profitability. The upward trend continues in 2019 with NOPAT reaching 103,763 thousand USD. A marked jump occurs in 2020, with NOPAT surging to 393,749 thousand USD, aligning with the sharp increase observed in net income during the same year. In 2021, NOPAT grows further but at a slower pace, reaching 413,095 thousand USD. This overall trend indicates enhanced operational performance and effective tax management over the years considered.

Summary of Trends

Both net income and NOPAT exhibit substantial growth, particularly between 2019 and 2021. The periods of 2020 and 2021 stand out as years of significant earnings expansion, indicating improved operational efficiency and overall profitability. The rise in NOPAT more closely aligns with operational improvements, while net income additionally reflects the impact of non-operational factors and tax considerations. The data suggests strengthened financial health and operational leverage leading to improved earnings capacity.

Income Tax Provision (Benefit)

The income tax provision shows significant fluctuations over the five-year period. Beginning in 2017, the provision was a substantial negative figure indicating a tax benefit of -$49,535 thousand. This negative trend decreased in magnitude over the following years, with the benefit lessening to -$22,413 thousand in 2018 and further narrowing to -$15,248 thousand in 2019. Notably, in 2020, the trend reversed to a positive tax provision of $16,463 thousand, indicating an actual tax expense during this year. However, in 2021, the tax provision returned to a negative value of -$21,853 thousand. This irregular pattern suggests volatility in taxable income or tax strategy changes across the years.

Cash Operating Taxes

Cash operating taxes displayed a marked upward trend throughout the observed period. The value, which was a minor negative amount of -$1,409 thousand in 2017, shifted to positive in 2018 at $5,774 thousand. Following this, the amount continued to increase consistently each year, reaching $2,782 thousand in 2019, then sharply rising to $23,282 thousand in 2020, and culminating in a substantial $69,622 thousand in 2021. This steady and sharp increase suggests a growing cash outflow related to taxes paid from operating activities, possibly reflecting higher taxable earnings or changes in tax payment timing or policies.

Total reported debt & leases

The total reported debt and leases show a significant and consistent increase over the five-year period. Starting from 88,048 thousand US dollars at the end of 2017, the figure rose substantially to 2,435,883 thousand US dollars by the end of 2021. This represents a nearly 28-fold increase, indicating a sharp rise in the company's leverage and financial obligations.

Stockholders’ equity

Stockholders’ equity experienced moderate growth from 396,894 thousand US dollars in 2017 to 742,424 thousand in 2020, peaking during the year 2020. However, there was a decline in 2021 to 628,619 thousand US dollars. Overall, equity increased by approximately 58% from 2017 to 2021, but the decline in the final year suggests potential pressures or adjustments impacting the company's net assets.

Invested capital

Invested capital exhibited a continuous and pronounced increase throughout the period evaluated. Beginning at 498,789 thousand US dollars in 2017, it more than quintupled to 2,842,921 thousand US dollars by the end of 2021. This upward trajectory suggests substantial capital deployment, likely reflecting expansion activities supported by rising debt levels and equity contributions.

Economic Profit

The economic profit experienced considerable fluctuations over the analyzed periods. Initially, there was a significant negative economic profit of -52,347 thousand US dollars at the end of 2017, which improved to a less negative -29,537 thousand in 2018. However, this trend reversed in 2019 with a deeper negative value of -59,956 thousand. A marked positive shift occurred in 2020, reaching a positive economic profit of 100,090 thousand, indicating a period of value creation. This was followed by another decline in 2021, where economic profit again turned negative to -72,538 thousand. The volatility suggests inconsistencies in generating returns above the cost of capital during these years.

Invested Capital

Invested capital showed a strong and consistent upward trend throughout the observed periods. From 498,789 thousand US dollars at the end of 2017, it increased steadily each year, reaching 536,522 thousand in 2018, then experiencing a sharp rise to 888,183 thousand in 2019. The growth momentum further accelerated, with invested capital almost doubling to 1,488,547 thousand in 2020, and more than doubling again to 2,842,921 thousand by the end of 2021. This sustained expansion indicates substantial investment and asset accumulation, possibly to support operational growth or expansion initiatives.

Economic Spread Ratio

The economic spread ratio, reflecting the difference between returns on invested capital and cost of capital, mirrored the economic profit pattern but added insights into profitability efficiency. Starting with a negative spread of -10.49% in 2017, the ratio improved significantly in 2018 to -5.51%, suggesting a reduction in loss per invested unit. In 2019, the spread deteriorated again to -6.75%, before turning positive in 2020 at 6.72%, indicating effective capital use and value creation during that year. However, the ratio reversed to a negative -2.55% in 2021, which, while better than earlier negative values, still signals returns below costs. The oscillations in this ratio align with the economic profit results and emphasize challenges in maintaining a consistently positive return on capital.

The financial data reveals several notable trends and fluctuations over the five-year period analyzed.

Adjusted Revenue

The adjusted revenue exhibits a consistent and significant upward trend from 2017 through 2021. Starting at approximately $441.8 million in 2017, the revenue increased to about $604.9 million in 2018, followed by $818.5 million in 2019. A substantial acceleration is observed in 2020, with revenue reaching nearly $1.73 billion, and continuing to rise to approximately $2.33 billion in 2021. This pattern indicates robust revenue growth, particularly strong during the years 2020 and 2021.

Economic Profit

The economic profit metric shows a volatile pattern with both negative and positive results across the periods. Initially, the company reported negative economic profit values, with losses of around $52.3 million in 2017 worsening to a loss of $59.9 million in 2019 after a relative improvement in 2018. A marked improvement occurred in 2020, where economic profit turned positive, approximately $100.1 million, suggesting effective profit generation in that year. However, this recovery was not sustained as economic profit declined again to a negative $72.5 million in 2021. This fluctuation reflects challenges in maintaining profitability amid growth.

Economic Profit Margin

The economic profit margin mirrors the economic profit trend with negative margins in the majority of years analyzed. The margin improved from -11.85% in 2017 to -4.88% in 2018 but moved back to -7.32% in 2019. The year 2020 stands out with a positive margin of 5.79%, aligning with the positive economic profit recorded, indicating improved operational profitability that year. In 2021, however, the margin reverted to a negative value of -3.11%, reinforcing the difficulty in sustaining consistent profitability relative to revenue growth.

Overall, the data suggests strong and accelerating revenue growth throughout the five years, with a peak in 2020 for economic profit and margin. Despite this revenue expansion, profitability indicators remained inconsistent, with negative economic profit and margin in most years except for 2020. This pattern could imply that while top-line growth is strong, managing costs and achieving sustainable economic profit remains a challenge.