Expedia Group Inc. (NASDAQ:EXPE)

The analysis of the quarterly financial data reveals several key trends related to profitability and leverage over the observed period.

Return on Assets (ROA)

The ROA demonstrated moderate fluctuations from March 2018 through December 2019, staying mostly between 1.3% and 2.8%, indicating consistent yet modest asset profitability. However, beginning in the first quarter of 2020, ROA experienced a sharp decline, reaching negative levels as low as -13.98% at the end of 2020, reflecting significant asset inefficiency or losses. From early 2021 onwards, there was a gradual recovery trend, with ROA returning to positive territory by the first quarter of 2022 and reaching 1.9%.

Financial Leverage

Financial leverage ratios were relatively stable from 2018 to 2019, generally ranging from about 4.36 to 5.4. Starting in early 2020, there was a notable increase in leverage, peaking at 15.05 in mid-2021. This substantial increase suggests a growing reliance on debt or other liabilities. While leverage decreased somewhat after mid-2021, it remained elevated above historical levels, finishing at 11.83 in the first quarter of 2022, indicating sustained higher financial risk.

Return on Equity (ROE)

ROE was positive and relatively strong during 2018 and 2019, fluctuating mostly between approximately 6.8% and 14.3%, indicating effective equity profitability. In early 2020, ROE experienced a dramatic downturn, falling to deeply negative values, with the lowest point being -103.16% at the end of 2020. This reflects severe losses impacting shareholders' equity during this period. Starting in 2021, ROE showed a marked recovery, eventually turning positive by the last quarter of 2021 and reaching 22.52% in the first quarter of 2022, suggesting a robust return to profitability.

Overall, the data indicates a period of strong financial strain beginning in early 2020, evidenced by declining returns and increased leverage, potentially related to adverse external events affecting operational performance. Subsequently, the company appears to have initiated a recovery, as reflected by improvements in profitability metrics and a stabilization, albeit still elevated, leverage ratio in early 2022.

Net Profit Margin

The net profit margin showed a generally positive trend prior to 2020, ranging from approximately 2.5% to 5.4%. This indicates moderate profitability with fluctuations but overall stability. However, starting from March 2020, there was a steep decline, with margins turning negative and reaching a nadir of -50.24% by December 2020. Subsequently, a recovery phase began, with margins progressively improving through 2021 and early 2022, eventually returning to positive territory at 4.87% by March 2022. This pattern suggests a severe impact on profitability starting in early 2020, followed by gradual restoration of earnings efficiency by the first quarter of 2022.

Asset Turnover

Asset turnover showed moderate variability over the period. From March 2018 through December 2019, the ratio fluctuated between 0.51 and 0.62, reflecting consistent operational efficiency in utilizing assets to generate revenue. A decline began in 2020, reaching a low of 0.19 in June 2021, evidencing a significant reduction in asset productivity during this timeframe. By March 2022, the ratio improved to 0.39 but remained below pre-2020 levels. This indicates that the company’s efficiency in generating sales from its assets was substantially affected post-2019, with only partial recovery through early 2022.

Financial Leverage

Financial leverage was relatively stable but elevated prior to 2020, ranging mostly between 4.3 and 5.4. From March 2020 onwards, leverage increased markedly, peaking at 15.05 in June 2021. A decline followed but the ratio stayed above 10 through early 2022. The significant increase in leverage during this period suggests heightened reliance on debt or other liabilities relative to equity, which could imply increased financial risk or strategic borrowing amidst challenging conditions.

Return on Equity (ROE)

ROE exhibited strength and growth before 2020, ranging from 6.8% to 14.3%, indicating efficient use of equity capital to generate earnings. Beginning in 2020, ROE sharply decreased into deeply negative territory, hitting a minimum of -103.16% by the end of 2020. The period through 2021 saw continued negative returns, though the magnitude lessened substantially by the end of 2021. As of March 2022, ROE turned positive at 22.52%, reflecting a strong rebound in equity profitability. This trajectory aligns with patterns observed in net profit margin and financial leverage, confirming significant operational and financial challenges starting in 2020, followed by a recovery phase.

Summary

The quarterly financial trends reveal a period of operational and financial distress beginning in early 2020, characterized by drastic declines in profitability (net profit margin and ROE) and asset efficiency (asset turnover), alongside increased financial leverage. The downturn corresponds with a pronounced negative impact on the company’s financial performance. From late 2020 through early 2022, a recovery trend is evident, with improving margins, asset turnover, ROE, and partially reduced financial leverage. The data suggests that while the company faced significant challenges, it has been undertaking measures that have restored financial health by the first quarter of 2022.

The analysis of the quarterly financial metrics reveals several notable trends and fluctuations across the reported periods.

Tax Burden

The tax burden ratio remained relatively stable and high from 2018 through 2019, generally ranging between 0.72 and 0.87. Data for 2020 and early 2021 is unavailable; however, by the first quarter of 2022, the tax burden ratio increased significantly to 0.94, indicating a higher proportion of earnings absorbed by taxes during this most recent quarter.

Interest Burden

From 2018 to 2019, the interest burden ratio exhibited moderate values mostly between 0.63 and 0.82, with a gradual upward trend. No data is provided for 2020 up to late 2021, but the ratio showed a sharp decline to -0.13 in late 2021 before rebounding to 0.6 in the first quarter of 2022. This indicates substantial volatility in interest expenses relative to operating income, impacting profitability during those periods.

EBIT Margin

The EBIT margin demonstrated positive values through 2018 and 2019, ranging mostly between 5% and 8%, indicating reasonable operating profitability. Beginning in 2020, this metric underwent a severe decline with negative margins that worsened significantly, reaching as low as -51.45% in the last quarter of 2020. A gradual recovery occurred through 2021 and early 2022, with the EBIT margin turning positive again by the first quarter of 2022 at 8.68%, reflecting a substantial rebound in operating performance.

Asset Turnover

Asset turnover was relatively stable and modestly positive between 2018 and early 2020, fluctuating around 0.5 to 0.57. The ratio declined markedly during 2020, reaching a low of 0.19 by the last quarter of 2020, suggesting decreased efficiency in generating revenue from assets. A gradual recovery trend emerged throughout 2021 and early 2022, climbing back to approximately 0.39 by the first quarter of 2022.

Financial Leverage

There was a generally increasing trend in financial leverage starting from about 4.3 in 2018 and moving upwards, peaking in mid-2021 at 15.05. The leverage then slightly decreased but remained elevated above 10 through early 2022. This rising leverage indicates increased reliance on debt financing, which may have heightened financial risk during this period.

Return on Equity (ROE)

ROE showed positive values throughout 2018 and 2019, ranging roughly from 6.8% to over 14%, signifying reasonable shareholder returns. Beginning in 2020, ROE turned negative and deteriorated sharply, reaching a low below -100% by the end of 2020. This reflects significant losses and poor returns on equity. A notable recovery trend took place in 2021 and early 2022, with ROE improving gradually and reaching a positive 22.52% by the first quarter of 2022, suggesting a substantial restoration of profitability and value to equity holders.

Overall, the financial metrics indicate a period of strong operational and profitability challenges through 2020 coinciding with heightened financial leverage and deteriorated returns. However, significant improvements across profitability, efficiency, and equity returns were evident in 2021 and early 2022, signaling a strong recovery trajectory following the difficult prior periods.

Net Profit Margin

The net profit margin exhibited moderate fluctuations from early 2018 through the end of 2019, ranging mostly between approximately 2.5% and 5.4%. This indicates relatively stable profitability during this period. However, starting in the first quarter of 2020, there was a pronounced and sharp decline, with the margin turning deeply negative and reaching a low of -50.24% by the fourth quarter of 2020. This sharp deterioration suggests significant operational or market challenges impacting profitability during this time frame. From 2021 onward, the margin showed a gradual recovery, improving consistently each quarter and returning to positive territory by the first quarter of 2022, reaching 4.87% by the end of the period analyzed.

Asset Turnover

Asset turnover ratios remained relatively stable between 0.5 and 0.6 during 2018 and 2019, indicating consistent efficiency in generating revenue from assets. Beginning in early 2020, a downward trend is noticeable, with turnover dropping significantly to a low of 0.19 by the first quarter of 2021. This decline aligns with the period of deteriorating profit margins and may reflect reduced operational activity or asset underutilization. Recovery began mid-2021, with turnover ratios gradually increasing to around 0.39 by the first quarter of 2022, suggesting improving asset utilization.

Return on Assets (ROA)

ROA trends closely follow those observed in net profit margins and asset turnover. From 2018 through 2019, ROA was positive and relatively stable, generally between 1.3% and 2.8%. The onset of 2020 marked a sharp decline, with ROA moving into negative territory, hitting a nadir of -13.98% in the fourth quarter of 2020. This negative performance likely reflects combined challenges in profitability and asset utilization. Starting in 2021, ROA gradually improved, approaching break-even in the first quarter of 2022 and reaching 1.9% by the end of the period, indicating a return to modestly positive returns on asset investment.

Overall Insights

The data reveal a period of steady financial performance up to the end of 2019, followed by a significant downturn beginning in early 2020, likely due to extraordinary external factors affecting both profitability and operational efficiency. The recovery patterns emerging in 2021 and continuing into 2022 suggest a gradual normalization of business conditions, with improving margins, asset turnover, and returns on assets. Continuous monitoring is advisable to assess whether these positive trends are sustained over subsequent periods.

Tax Burden

The tax burden ratio exhibited relative stability from March 2018 through December 2019, fluctuating consistently around 0.72 to 0.87. Notably, there are no recorded values during 2020 and much of 2021, suggesting missing data or reporting gaps. By March 2022, the tax burden sharply increased to 0.94, indicating a greater proportion of pre-tax income allocated to taxes compared to earlier periods.

Interest Burden

Interest burden ratios showed a moderate upward trend through 2018 and 2019, moving from around 0.63 to a high of 0.82. Data for 2020 and much of 2021 are absent, followed by an unusual negative value of -0.13 and a partial recovery to 0.6 in early 2022. The negative figure signals an irregularity or extraordinary event impacting interest expenses or income during that interval.

EBIT Margin

The earnings before interest and taxes (EBIT) margin demonstrated a positive and stable profile during 2018 and 2019, maintaining levels close to 5% to nearly 8%. However, from March 2020 onward, the margin deteriorated sharply, recording negative values throughout 2020, including a drastic drop to -51.45% in the final quarter. Recovery commenced in 2021, with margins improving progressively but remaining below pre-2020 levels until surpassing 8% by March 2022. This pattern reflects significant operational challenges coinciding with the year 2020.

Asset Turnover

Asset turnover ratios generally ranged between 0.51 and 0.62 before 2020, indicating steady utilization of assets to generate revenue. A downward trend is observed starting in early 2020, with ratios declining to as low as 0.19 in the first quarter of 2021. Thereafter, a moderate recovery occurred, with the ratio reaching 0.39 by March 2022. This suggests a period of diminished efficiency in asset usage followed by gradual improvement.

Return on Assets (ROA)

ROA remained positive and relatively stable prior to 2020, fluctuating from around 1.3% to 2.8%. Beginning in Q1 2020, the company experienced negative returns stretching through all four quarters of 2020, hitting a low near -14%. A slow upward trend ensued in 2021 with a near-zero positive percentage by the end of the year, and further improvement into positive territory, reaching 1.9% in Q1 2022. This indicates a recovery from significant asset profitability losses during the crisis period.

Tax Burden

The tax burden ratio generally remained stable between 0.72 and 0.87 from March 2018 through December 2019. Beginning in 2020, there is a lack of data until a steep increase to 0.94 is observed in March 2022, indicating potentially higher effective tax rates or altered tax expenses relative to pretax income in the latest period.

Interest Burden

The interest burden ratio showed moderate fluctuations from 0.63 to 0.82 during the periods from March 2018 through December 2019, reflecting relatively stable interest expenses compared to operating income. Notably, in the first quarter of 2022, the ratio displayed unusual volatility, dropping sharply to -0.13 before increasing again to 0.6, which may suggest irregularities such as interest income, restructuring, or one-time financial events impacting interest costs.

EBIT Margin

EBIT margins were positive and relatively steady, ranging from approximately 5% to nearly 8% before 2020. Beginning in March 2020, there is a sharp decline into negative territory, with margins worsening progressively through 2020, reaching a low of -51.45% in December 2020. Margins improved gradually in 2021 and into early 2022, returning to positive levels by March 2022 at 8.68%. This trend indicates significant operational challenges likely linked to external factors during 2020 with a subsequent recovery phase.

Net Profit Margin

Net profit margins track a similar pattern to EBIT margins, with consistent positive values between 2.54% and 5.36% through 2019. Starting in the first quarter of 2020, net profit margins declined sharply into negative territory, reaching lows near -50% in late 2020. Margins showed a recovery trajectory in 2021 and into early 2022, returning close to breakeven and improving to 4.87% by March 2022. This pattern reflects strong operational and profitability impacts during 2020, followed by a gradual restoration of profitability.