Express Scripts Holding Co. (NASDAQ:ESRX)

Net Operating Profit After Taxes (NOPAT)

There is a consistent upward trend in NOPAT from 2013 to 2016, indicating improving operational profitability over this period. The value rose from approximately 1.82 billion to 3.38 billion. However, in 2017, there is a slight decline to around 3.27 billion, suggesting a minor decrease in net operating profitability after taxes after four years of growth.

Cost of Capital

The cost of capital remains relatively stable throughout the five-year period, fluctuating narrowly between 10.82% and 11.86%. This suggests that the company’s overall capital expense stayed consistent, which may contribute to predictable financing conditions.

Invested Capital

Invested capital shows a general downward trend from 2013 through 2016, decreasing from about 41.3 billion to 35.7 billion. This indicates a reduction in the capital base deployed in the company’s operations. However, in 2017, there is an increase to approximately 37.0 billion, which could reflect renewed investment or adjustments in asset management.

Economic Profit

Economic profit, representing the value creation after covering the cost of capital, is negative throughout the period but shows a consistent improvement. From a loss of around 3.02 billion in 2013, the negative value reduces steadily, reaching its smallest deficit at approximately 490 million in 2016. Despite this progress, economic profit worsens again in 2017 to about -752 million, indicating that the company still operates below its cost of capital but is on a path toward reduced economic losses, except for the setback in the final year.

Overall Insights

The company demonstrates strengthening profitability and a gradual reduction in invested capital in the early years, contributing to decreasing economic losses. The cost of capital remains relatively constant, suggesting steady financing costs. The slight deterioration in NOPAT and economic profit in 2017, along with the rise in invested capital, may merit further investigation to understand the drivers behind these changes. The overall trend points toward improving operational efficiency but with challenges in consistently generating economic profit.

Net Income Attributable to Express Scripts

The net income attributable to the company showed a consistent upward trend throughout the five-year period. Starting from approximately 1.84 billion US dollars in 2013, the net income increased annually, reaching about 4.52 billion US dollars by the end of 2017. This represents a more than doubling of net income over the duration analyzed, indicating strong profitability growth.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures likewise showed an overall increasing trend, rising from roughly 1.82 billion US dollars in 2013 to over 3.27 billion US dollars in 2017. The growth is generally steady, with an especially notable increase between 2015 and 2016. However, unlike net income, NOPAT slightly declined in 2017 compared to the previous year, decreasing from approximately 3.38 billion to 3.27 billion US dollars.

Comparative Insights

Both net income and NOPAT demonstrate sustained profitability improvements over the analyzed timeframe, highlighting effective operational and financial management. The disparity in 2017, where net income continued rising but NOPAT decreased, may suggest changes in operating efficiency, tax impact, or other factors affecting post-tax operating profits.

Provision for Income Taxes

The provision for income taxes exhibits fluctuation over the five-year period. It begins at 1,104,000 thousand US dollars at the end of 2013, then decreases slightly in 2014 to 1,031,200 thousand US dollars. A notable increase occurs in 2015, with the provision reaching 1,364,300 thousand US dollars, followed by a decline in 2016 to 999,500 thousand US dollars. By the end of 2017, there is a significant drop to 397,300 thousand US dollars, marking the lowest figure in the observed timeframe.

Cash Operating Taxes

Cash operating taxes demonstrate more variability with an overall upward trajectory throughout the period. Starting at 1,890,614 thousand US dollars in 2013, the amount decreases to 1,669,615 thousand US dollars in 2014. Subsequently, a sharp increase is observed in 2015, reaching 2,004,540 thousand US dollars. In 2016, cash operating taxes decline again to 1,743,214 thousand US dollars before climbing significantly to 2,292,125 thousand US dollars by the end of 2017, the highest level recorded in the five years.

Comparative Observations

Overall, the provision for income taxes and cash operating taxes do not follow the same trend patterns. While the provision for income taxes peaks in 2015 before steadily declining to its lowest point in 2017, cash operating taxes show a general increasing trend despite year-to-year fluctuations. The divergence between these two tax-related metrics may suggest differences in tax accounting policies, timing differences, or changes in cash flow management relating to tax obligations.

Total Reported Debt & Leases

The total reported debt and leases show a fluctuating trend over the five-year period. The value decreased slightly from approximately 14.27 billion USD at the end of 2013 to about 13.86 billion USD in 2014. However, from 2014 onward, the debt increased steadily, reaching around 16.25 billion USD by the end of 2017. This reflects a rising leverage position in the latter years.

Total Express Scripts Stockholders’ Equity

Stockholders’ equity demonstrates a declining trend from 2013 through 2016, dropping from roughly 21.84 billion USD in 2013 to about 16.24 billion USD in 2016. This decline represents a significant reduction in equity over this period. Notably, in 2017, there is a reversal of this downward trend with equity increasing to about 18.12 billion USD, suggesting a partial recovery or accumulation of retained earnings or capital injection during that year.

Invested Capital

Invested capital also declined consistently from 2013 to 2016, moving from approximately 41.29 billion USD to around 35.71 billion USD. In 2017, a modest increase to about 37.01 billion USD is observed. This trend indicates a contraction in the total capital employed by the company initially, followed by a slight expansion towards the end of the period.

Economic Profit Trends

Over the observed period, the company showed persistent negative economic profit, indicating that the returns did not exceed the cost of capital. However, the magnitude of the negative economic profit decreased substantially from -3,021,951 thousand US dollars in 2013 to -490,027 thousand US dollars in 2016, suggesting an improving trend. Thereafter, there was a slight reversal with economic profit becoming more negative again to -752,101 thousand US dollars in 2017, indicating some loss of momentum in value creation.

Invested Capital Patterns

The invested capital exhibited a declining trend from 41,289,230 thousand US dollars in 2013 to 35,712,343 thousand US dollars in 2016, reflecting potential divestitures, asset sales, or efficient capital management. In 2017, there was a modest increase in invested capital to 37,007,152 thousand US dollars, signaling a slight reversal or reinvestment into the business.

Economic Spread Ratio Analysis

The economic spread ratio, representing the difference between the return on invested capital and the cost of capital, remained negative for all periods, consistent with the negative economic profits. The ratio improved significantly from -7.32% in 2013 to -1.37% in 2016, indicating closer alignment of returns to costs. However, in 2017, the ratio slightly deteriorated to -2.03%, which corresponds with the increase in negative economic profit observed that year.

Overall Insights

The data suggests the company was consistently operating below its cost of capital throughout the five-year period but made notable progress toward reducing losses between 2013 and 2016. The minor setbacks in 2017 point to challenges in maintaining or further improving economic profitability. The reduction and subsequent modest increase in invested capital may reflect strategic capital allocation decisions affecting the company's operating efficiency and return generation capacity.

The company exhibited a consistently negative economic profit over the five-year period, indicating that its economic profit did not surpass its cost of capital during these years. Although economic profit was substantially negative in 2013, reaching approximately -3.02 billion US dollars, this negative value showed a clear trend toward improvement, reducing in magnitude to around -752 million US dollars by 2017.

Revenues remained relatively stable throughout the period, hovering at about 100 billion US dollars annually. The company experienced a slight decline from approximately 104.1 billion US dollars in 2013 to roughly 100.1 billion US dollars in 2017, a reduction of about 4 percent over five years. This stability in revenue contrasts with the significant negative economic profit, suggesting issues in profitability or cost management rather than sales volume.

Regarding economic profit margin, the metric showed a gradual improvement but remained negative throughout. Starting at -2.9% in 2013, the margin improved steadily, reaching its best level in 2016 at -0.49%, before slightly declining again to -0.75% in 2017. This pattern indicates that the gap between economic profit and revenue narrowed but the company failed to generate positive economic profit margins in the observed timeframe.

Summary of observations

The company experienced ongoing challenges in generating positive economic profit despite steady revenue streams.

Economic profit losses decreased significantly over time, indicating some progress in operational efficiency or cost control.

The persistent negative economic profit margin signals ongoing issues with achieving profitability relative to capital costs.

Overall, the financial data reflect a pattern of stabilization in revenues accompanied by a gradual recovery in economic profitability, though not yet reaching positive territory by 2017.