Express Scripts Holding Co. (NASDAQ:ESRX)

Net operating profit after taxes (NOPAT)

NOPAT exhibited a consistent upward trend from 2013 through 2016, increasing from approximately $1.82 billion to around $3.38 billion, indicating strong operational performance growth. However, in 2017, there was a slight decline to about $3.27 billion, suggesting a potential slowdown in profit growth or increased operational pressures during that year.

Cost of capital

The cost of capital remained relatively stable over the five-year period, fluctuating narrowly between 10.72% and 11.75%. This stability suggests consistent market or risk perceptions regarding the company’s financing costs, with a slight peak in 2014 and a mild downward trend afterwards.

Invested capital

Invested capital showed a downward trend from approximately $41.29 billion in 2013 to a low of about $35.71 billion in 2016, reflecting possible divestitures, asset sales, or efficient capital management. However, in 2017, invested capital increased again to roughly $37.01 billion, indicating renewed investment or acquisition activity.

Economic profit

Economic profit improved significantly during the period, starting from a negative value of about -$2.98 billion in 2013 and moving towards a smaller loss of approximately -$454 million in 2016. This improvement suggests enhanced value creation abilities relative to the cost of capital. Despite this, economic profit declined again to around -$715 million in 2017, indicating that although operational profits were strong, the returns on invested capital were still not sufficient to cover the cost of capital fully.

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.

The data shows a consistent improvement in economic profit over the five-year period, moving from a significant loss of approximately -2,976,405 thousand US dollars in 2013 to a reduced loss of -715,001 thousand US dollars in 2017. Despite this positive trend, the economic profit remains negative throughout the entire period, indicating that the company has not yet achieved positive economic value.

Invested capital fluctuates slightly but shows an overall declining trend from 41,289,230 thousand US dollars in 2013 to 37,007,152 thousand US dollars in 2017. The gradual decrease suggests some reduction in the amount of capital employed in the business over this timeframe.

The economic spread ratio, which measures the difference between return on invested capital and cost of capital, reflects an improving trend similar to economic profit. It starts at -7.21% in 2013, indicating a substantial negative spread, and improves progressively to -1.93% by 2017. Nonetheless, the ratio remains negative throughout, showing that returns have consistently been below the cost of capital.

Economic Profit

Consistently negative, but with a marked reduction in losses over time, signaling improving profitability though still in the red.

Invested Capital

Exhibits a moderate downward trend, indicating a gradual reduction in capital employed.

Economic Spread Ratio

Improves from -7.21% to -1.93%, showing a narrower gap between returns and cost of capital but remaining negative.

The financial data reveals several important trends concerning profitability and revenue over the five-year period examined.

Economic Profit

The economic profit, measured in thousands of US dollars, shows a consistent improvement from 2013 through 2016, moving from a substantial negative value of -2,976,405 to a significantly lower negative value of -454,395. However, in 2017, there is a reversal of this positive trend with economic profit worsening again to -715,001, though still better than the initial 2013 figure. This indicates that while the company was gradually reducing economic losses up to 2016, some factors led to a setback in 2017.

Revenues

Revenues demonstrate relative stability throughout the period, starting at approximately 104.1 billion US dollars in 2013, then decreasing slightly in 2014 to approximately 100.9 billion, and remaining close to this figure through 2017 with minor fluctuations. The revenue levels do not show significant growth nor decline, suggesting a stable market presence without major expansion or contraction in top-line sales.

Economic Profit Margin

The economic profit margin, expressed as a percentage, follows a somewhat parallel trend to economic profit. It improves steadily from -2.86% in 2013 to -0.45% in 2016, reflecting enhanced operational efficiency or cost management relative to revenues. In 2017, the margin worsens slightly to -0.71%, aligning with the observed downturn in economic profit for the same year. Despite these improvements, the margin remains negative throughout, signaling ongoing challenges in generating returns above the cost of capital.

Overall, the data suggests the company made progress in reducing its economic losses and improving profitability ratios until 2016, with largely stable revenues during the period. The setback observed in 2017 indicates potential emerging challenges or changes in economic conditions that impaired the previous trajectory of improvement. Persistent negative economic profit margins underscore the need for continued focus on enhancing profitability.