Expand Energy Corp. (NASDAQ:EXE)

Operating Profit Margin

The operating profit margin demonstrates significant volatility over the analyzed period. It increased substantially from 9.64% in 2021 to a peak of 51.96% in 2023, indicating improved operational efficiency and profitability. However, in 2024, the margin sharply declined to -18.85%, revealing a reversal to operational losses.

Net Profit Margin

The net profit margin exhibits a high initial value of 86.67% in 2021, followed by a notable decrease to 34.95% in 2022. It then slightly recovered to 40% in 2023 before dropping to a negative figure of -16.76% in 2024. This trend suggests fluctuating overall profitability, with a critical downturn into losses by the latest year.

Return on Equity (ROE)

Return on equity reveals a declining trend throughout the period. Starting from an exceptionally high 111.59% in 2021, it decreased markedly to 54.1% in 2022 and further to 22.55% in 2023. By 2024, ROE fell below zero to -4.06%, reflecting a loss relative to shareholders’ equity and deteriorating financial performance.

Return on Assets (ROA)

The return on assets follows a consistent declining trajectory. It began at 57.48% in 2021, dropped to 31.91% in 2022, continued decreasing to 16.83% in 2023, and turned negative at -2.56% in 2024. This indicates decreasing effectiveness in asset utilization to generate profits, culminating in asset-related losses.

Summary

Overall, the financial performance measures reflect a strong start in 2021 with high profitability and returns. Although there was improvement in the operating profit margin until 2023, other profitability metrics like ROE and ROA showed steady declines over the period. The year 2024 marks a significant downturn, with negative operating and net profit margins as well as negative returns on equity and assets, indicating the company experienced considerable financial challenges or losses during that year.

The operating profit margin exhibited significant fluctuations over the four-year period. Initial growth was followed by a substantial decline, culminating in a negative margin in the most recent year.

Operating Profit Margin Trend

In 2021, the operating profit margin stood at 9.64%. This increased substantially to 26.76% in 2022, indicating improved operational efficiency or pricing power. The margin continued to rise dramatically in 2023, reaching 51.96%, suggesting a period of exceptionally strong profitability from core operations. However, a sharp reversal occurred in 2024, with the operating profit margin falling to -18.85%, signifying an operating loss.

The movement in operating profit margin closely mirrors the trend in income from operations. The substantial increases in operating income between 2021 and 2023 directly contributed to the rising margins. Conversely, the significant operating loss reported in 2024 is the primary driver of the negative margin observed in that year.

Revenue Relationship

Revenues increased significantly from 2021 to 2022, and while remaining high in 2023, decreased substantially in 2024. The initial revenue growth likely supported the margin expansion in 2022. However, the decline in revenues in 2024, coupled with an operating loss, resulted in the substantial margin contraction. The disproportionate decline in revenues compared to the operating loss suggests that fixed costs may be playing a significant role in the 2024 results.

The volatility in the operating profit margin warrants further investigation. Understanding the factors contributing to the dramatic shift from profitability to loss in 2024 is crucial. This includes a detailed analysis of cost structures, revenue drivers, and any unusual items impacting operating income.

The net profit margin exhibited significant fluctuations over the four-year period. Initially high, the metric experienced a substantial decline, followed by a partial recovery and then a significant loss.

Net Profit Margin Trend

In 2021, the net profit margin stood at 86.67%. This represents a very strong profitability position. However, a dramatic decrease was observed in 2022, with the net profit margin falling to 34.95%. A partial recovery occurred in 2023, as the net profit margin increased to 40.00%. This improvement, however, proved unsustainable, as the metric turned negative in 2024, reaching -16.76%.

The volatility in net profit margin appears closely linked to revenue fluctuations. While net income decreased across the period, the largest decline occurred between 2022 and 2023. Revenues more than doubled between 2021 and 2022, but then decreased significantly in both 2023 and 2024. The negative net profit margin in 2024 suggests that the company incurred a net loss despite a relatively stable revenue figure compared to 2023.

Relationship to Net Income and Revenues

The net profit margin is calculated as net income divided by revenues. The substantial decline in net income from 2021 to 2024, coupled with the revenue changes, directly drove the observed fluctuations in the net profit margin. The 2024 result indicates that costs and expenses exceeded revenues, resulting in a net loss and a negative margin.

The shift from a high margin in 2021 to a loss in 2024 warrants further investigation into the underlying drivers of cost of goods sold, operating expenses, and any non-operating items impacting net income. The company’s ability to restore profitability will depend on its capacity to manage costs effectively and/or increase revenue.

The Return on Equity (ROE) exhibited a significant declining trend over the four-year period. Initially strong, the ratio decreased substantially, ultimately resulting in a negative value in the most recent year.

ROE Trend

In 2021, ROE stood at 111.59%. This figure decreased considerably to 54.10% in 2022, representing a substantial reduction in profitability relative to equity. The decline continued in 2023, with ROE falling to 22.55%. By 2024, ROE had turned negative, registering at -4.06%, indicating a loss generated for each dollar of shareholder equity.

Net Income Impact

The decrease in ROE correlates with the trend in net income. Net income decreased from US$6,328 million in 2021 to US$4,936 million in 2022, then further to US$2,419 million in 2023. The most significant change occurred between 2023 and 2024, with net income becoming a loss of US$-714 million. This decline in net income is a primary driver of the observed ROE reduction.

Stockholders’ Equity Impact

Stockholders’ equity increased consistently throughout the period, rising from US$5,671 million in 2021 to US$17,565 million in 2024. While increasing equity generally suggests financial strength, the simultaneous decline in net income meant that the returns generated on this equity diminished, and ultimately became negative. The increasing equity base amplified the impact of the net loss in 2024, contributing to the negative ROE.

The combination of decreasing net income and increasing stockholders’ equity resulted in a dramatic decrease in ROE. The shift to a negative ROE in 2024 warrants further investigation to understand the underlying causes of the loss and the sustainability of the equity growth.

The Return on Assets (ROA) exhibited a significant downward trend over the four-year period. Initially strong, the ratio declined progressively, ultimately resulting in a negative value in the most recent year.

ROA Trend

In 2021, the ROA stood at 57.48%. This represents a highly efficient utilization of assets to generate profit. However, a substantial decrease was observed in 2022, with the ROA falling to 31.91%. The decline continued in 2023, reaching 16.83%. By 2024, the ROA had turned negative, registering at -2.56%, indicating that the company’s assets were generating a loss rather than a profit.

Net Income Impact

The decrease in ROA correlates with a decline in net income. Net income decreased from US$6,328 million in 2021 to US$4,936 million in 2022, then further to US$2,419 million in 2023. The most significant change occurred between 2023 and 2024, with net income becoming a loss of US$-714 million. This substantial reduction in profitability directly contributed to the negative ROA in 2024.

Asset Base Impact

Total assets increased from US$11,009 million in 2021 to US$15,468 million in 2022, and then decreased slightly to US$14,376 million in 2023. However, a considerable increase in total assets occurred in 2024, reaching US$27,894 million. While asset growth can be a sign of expansion, the simultaneous decline in net income suggests that the increased asset base was not effectively utilized to generate corresponding profits, exacerbating the decline in ROA.

The combined effect of decreasing net income and, particularly, the substantial increase in total assets in the final year, resulted in a marked deterioration of the company’s ROA. The negative ROA in 2024 warrants further investigation to understand the underlying causes and potential corrective actions.