First Solar Inc. (NASDAQ:FSLR)

The analysis of the quarterly financial performance reveals notable trends in the company's return metrics and financial structure over the observed periods.

Return on Assets (ROA)

ROA demonstrated a general upward trend from the first quarter of 2020 through the end of 2021, increasing from 0.62% to a peak of 7.77% in the second quarter of 2021. This was followed by a decline throughout 2022, reaching a negative value of -0.54% in the last quarter of 2022. Starting in 2023, ROA showed a significant recovery, increasing steadily to reach a high of approximately 10.91% by the third quarter of 2024. This pattern indicates periods of fluctuating profitability in relation to assets, with a notable dip during 2022 and strong improvement thereafter.

Financial Leverage

Financial leverage remained relatively stable between 1.25 and 1.35 from early 2020 to late 2021, suggesting a consistent use of debt relative to equity during that period. Beginning in late 2021, there was a gradual increase in leverage, peaking at 1.56 by the second quarter of 2024, before a slight decrease to around 1.51 in the third quarter of 2024. This upward trend indicates a moderate increment in the reliance on debt financing over time.

Return on Equity (ROE)

ROE closely mirrors the movements observed in ROA but with amplified values, reflecting the impact of financial leverage. It rose from 0.84% in the first quarter of 2020 to a peak of 9.73% in the second quarter of 2021, followed by a downturn culminating in a negative return of -0.76% at the end of 2022. Subsequently, ROE demonstrated robust growth beginning in 2023, reaching as high as 16.59% in the third quarter of 2024. This recovery and growth phase signals improved profitability and effective equity management post-2022.

Overall, the data points to a period of growth in asset efficiency and equity returns until mid-2021, a marked decline in profitability across 2022, likely due to underlying operational or market challenges, and a strong rebound through 2023 and into 2024. The gradual increase in financial leverage suggests a strategic shift to greater use of debt, which may have supported enhanced returns on equity when profitability improved.

Net Profit Margin

The net profit margin exhibited a general upward trend from March 2020 until December 2021, reaching a peak around 18.96% in mid-2021 before gradually declining through 2022 with a trough of -1.69% at year-end 2022. Beginning in 2023, it recovered significantly, climbing sharply to reach 32.41% by the third quarter of 2024, which represents the highest margin observed in the entire period analyzed.

Asset Turnover

The asset turnover ratio remained relatively stable throughout the entire period, fluctuating mildly within the narrow range of 0.32 to 0.50. It started near 0.44 in early 2020 and showed a slight downward bias in 2022 with the lowest points around 0.32 in late 2022 to 0.33 in early 2023. The ratio showed modest improvement afterward, returning to mid-0.30s levels by mid-2024.

Financial Leverage

Financial leverage displayed limited variation until late 2021, typically hovering between 1.24 and 1.35. From the end of 2022 onward, leverage incrementally increased, peaking at 1.56 in mid-2024, before a slight reduction to about 1.51 by the third quarter of 2024. This indicates a gradual rise in reliance on debt or liabilities relative to equity in the latter periods.

Return on Equity (ROE)

Return on equity initially showed a marked increase, climbing from below 1% in early 2020 to highs reaching approximately 9.73% by mid-2021. Subsequently, it declined noticeably through 2022, briefly dipping into negative territory at the year-end. Starting in 2023, ROE improved steadily, culminating in approximately 16.44% by the third quarter of 2024, reflecting growing profitability relative to shareholders' equity.

Overall Analysis

The data reveal a recovery phase following a downturn in profitability during 2022. While the asset turnover remained steady, the company increased its financial leverage moderately after 2022. The strong rebound in net profit margin and ROE in 2023 and into 2024 indicates improved operational efficiency or profitability, despite relatively stable asset usage and a moderate increase in financial risk exposure.

Tax Burden

The tax burden ratio experienced significant volatility, with values fluctuating widely between periods. Notably, there were drastic declines such as the negative figure recorded at the end of 2022, indicating possible tax credits or losses offsetting taxable income. After this period, the ratio stabilized around values close to 0.9, suggesting a return to a more consistent effective tax rate in recent quarters.

Interest Burden

The interest burden ratio shows a general upward trend toward unity over time, indicating a reduction in interest expenses relative to earnings before interest and taxes. The ratio improved steadily from 0.18 in mid-2020 to values around 0.97–0.99 in the later periods, reflecting improved interest coverage and potentially lower interest costs or higher EBIT.

EBIT Margin

The EBIT margin demonstrated a strong upward trend throughout the periods analyzed. Starting from a negative or minimal margin in early 2020, it increased significantly, peaking above 35% in the most recent quarters of 2024. This indicates enhanced operational profitability and improved efficiency in managing operating expenses relative to sales. Some earlier fluctuations were present, but the overall trend suggests growth in core earnings.

Asset Turnover

The asset turnover ratio exhibited a slight declining trend over the timeframe. While initially around 0.44, it declined to approximately 0.32–0.34 in more recent periods. This suggests that the company has become somewhat less efficient in generating revenue from its assets, possibly due to asset base expansion or changes in sales dynamics.

Financial Leverage

Financial leverage increased gradually throughout the periods, moving from around 1.29 to a peak near 1.56, and slightly correcting to around 1.51 most recently. This indicates a mild increase in the use of debt or liabilities relative to equity, which could imply a moderate increase in financial risk but also a potential for amplified returns on equity.

Return on Equity (ROE)

Return on equity showed an overall increasing trend with some volatility. Early periods reflected low or slightly negative returns, but from mid-2021 onward, the ROE improved significantly, reaching levels above 16% in 2024. This improvement aligns with increasing EBIT margins and stable interest burdens, suggesting enhanced profitability and effective use of financial leverage to generate shareholder returns.

Net Profit Margin

The net profit margin exhibited a generally positive growth trend from early 2020 through the end of 2021, increasing from 1.42% in March 2020 to a peak of 18.96% in June 2021. Following this peak, margins experienced a notable decline throughout 2022, dropping sharply to -1.69% by December 2022, indicating a period of unprofitability. However, a strong recovery occurred starting in early 2023, with net profit margin escalating significantly to reach over 32% by late 2024. This recovery highlights substantial improvements in the company’s profitability after the downturn.

Asset Turnover

Asset turnover demonstrated relative stability over the period, fluctuating within a narrow range between 0.32 and 0.50. The ratio started at 0.44 in early 2020, reached a peak of 0.50 in September 2020, then trended slightly downward, stabilizing around 0.32 to 0.34 from late 2021 through 2024. This stability suggests consistent efficiency in utilizing assets to generate revenue despite fluctuations in profitability.

Return on Assets (ROA)

Return on assets followed a trajectory similar to net profit margin. Beginning at a low of 0.62% in March 2020, ROA increased steadily to around 7.77% by mid-2021 before dropping to negative territory (-0.54%) at the end of 2022. This decline corresponds with the period of reduced net profit margins and indicates diminished overall asset profitability. Subsequently, ROA rebounded strongly in 2023 and 2024, reaching near 11% levels. The recovery in ROA reflects improved profitability and effective asset management during this latter period.

Tax Burden

The tax burden ratio exhibits significant volatility in the early periods, notably high in mid-2020, followed by a sharp decline and fluctuations around values below 1 in subsequent quarters. Notably, a large negative value appears in late 2022, indicating an unusual tax effect. In the most recent quarters, the ratio stabilizes close to 0.92–0.93, suggesting a more consistent effective tax rate.

Interest Burden

The interest burden ratio shows a marked improvement from a very low level in mid-2020 to a steady state above 0.9 in later quarters. From early 2021 onward, the ratio remains relatively stable near 0.95 and above, indicating reduced interest expense impact relative to earnings before interest and taxes over time.

EBIT Margin

Operating profitability, as measured by EBIT margin, demonstrates a strong upward trend from negative and low single digits in early 2020 to peaks exceeding 30% in 2024. There is some volatility with dips in late 2022 and early 2023, but the margin rebounds significantly thereafter, suggesting improved operational efficiency or pricing power over the period analyzed.

Asset Turnover

The asset turnover ratio remains relatively stable but on a slight downward trend, moving from around 0.44 in early 2020 to approximately 0.33–0.34 in recent quarters. This suggests that asset utilization efficiency has slightly diminished, possibly due to asset base growth outpacing sales growth or shifts in asset composition.

Return on Assets (ROA)

The return on assets follows a pattern similar to EBIT margin but with lower absolute values, increasing from below 1% in early 2020 to above 10% in 2024. Despite some setbacks in late 2022 where ROA turned negative, the subsequent recovery indicates improved profitability on asset investments. The general upward trend points to more effective capitalization and earnings generation.

Analysis of the quarterly financial metrics reveals notable fluctuations and trends over the observed periods.

Tax Burden Ratio

This ratio exhibits considerable variability across the quarters. Early observations show values fluctuating around 1, with occasional sharp deviations, including a notably negative value in late 2022. Subsequently, the tax burden stabilizes around 0.9 in recent quarters, indicating a consistent proportion of income retained after tax expenses.

Interest Burden Ratio

The interest burden ratio markedly improves after mid-2020, rising from a low initial value and maintaining levels near or above 0.9 in most subsequent quarters. This consistency suggests effective management of interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin shows a strong upward trend, beginning in negative territory in early 2020 and progressively increasing to exceed 35% by late 2024. Some intermittent dips occur, particularly in late 2022, but the general trajectory reflects significant improvement in operating profitability over time.

Net Profit Margin

Net profit margin mirrors the pattern of EBIT margin with progressive growth from modest values, including a brief negative period in late 2022. The margin improves substantially in recent quarters, exceeding 32%, indicating enhanced overall profitability and effective cost and tax management.

In summary, the financial ratios indicate strengthening profitability, efficient management of interest obligations, and relatively stable tax impacts in recent periods. The transient challenges seen around late 2022 appear to have been successfully addressed, as evidenced by the strong rebound in profit margins and burden ratios.