Fiserv Inc. (NASDAQ:FISV)

The financial data reveals several notable trends regarding the company's profitability and capital management over the analyzed period.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a consistent upward trajectory from 2017 through 2021, increasing from $1,176 million to $1,797 million. This steady growth suggests improvements in operational efficiency or revenue generation leading to higher after-tax operating profits.

Cost of Capital

The cost of capital percentage demonstrates a slight fluctuation but a gradual decline overall, starting at 11.5% in 2017 and decreasing to 10.25% by 2021. This declining trend indicates the company’s capital has become marginally less expensive over the years, potentially improving the overall profitability threshold.

Invested Capital

Invested capital experienced a dramatic increase between 2018 and 2019, jumping from approximately $9.9 billion to $62.5 billion, followed by a modest decline in subsequent years, settling around $59.7 billion in 2021. This significant increase could be attributed to large-scale acquisitions, asset investments, or capital infusions during that period. The slight reduction afterward suggests some divestitures, asset sales, or efficiency in capital utilization.

Economic Profit

Despite rising NOPAT, economic profit presents a starkly different picture. It was positive and growing from 2017 to 2018 but turned sharply negative in 2019 and remained deeply negative through 2021. This indicates that the returns generated on the invested capital fell below the cost of that capital for the latter years. The significant increase in invested capital without a proportionate increase in NOPAT adversely affected the economic profit, suggesting the returns on new or existing assets have not met the company's cost of capital.

Overall, while operational profitability as measured by NOPAT improved steadily, the sharp and substantial rise in invested capital has led to a sustained economic profit loss since 2019. This divergence highlights challenges in achieving efficient capital deployment or extracting sufficient returns from increased investments. The reduction in the cost of capital slightly offsets these issues but has not been sufficient to restore positive economic profit within the analyzed timeframe.

The analysis of the annual financial data reveals mixed trends in profitability measures over the five-year period ending December 31, 2021.

Net Income Attributable to Fiserv, Inc.

The net income shows some volatility throughout the years. From 2017 to 2018, it decreased slightly from 1246 million USD to 1187 million USD. A more significant decline occurred between 2018 and 2019, dropping to 893 million USD. However, this was followed by a modest recovery in 2020 to 958 million USD and a substantial increase in 2021 to 1334 million USD, surpassing the initial 2017 level. This pattern indicates a dip in profitability midway through the period, followed by a strong rebound in recent years.

Net Operating Profit After Taxes (NOPAT)

NOPAT displayed a consistent upward trajectory over the entire five-year span. It increased from 1176 million USD in 2017 to 1322 million USD in 2018, with further growth to 1565 million USD in 2019. This positive trend persisted in 2020 at 1728 million USD and reached 1797 million USD by the end of 2021. The steady rise in NOPAT suggests improving operational efficiency and profitability after taxes despite fluctuations in net income.

Overall, while net income faced a decline mid-period before a recovery, NOPAT steadily improved year-over-year, indicating strengthening core operating performance. The divergence between net income and NOPAT trends could be attributed to factors such as non-operating items, tax effects, or one-time charges influencing net income figures differently than operating profit metrics.

The financial data reveals varying trends in tax-related expenses over the five-year period ending in 2021.

Income Tax Provision

The income tax provision exhibits fluctuations without a clear linear trend. Starting at 158 million USD in 2017, it more than doubled to 378 million USD in 2018. This was followed by a significant reduction to 198 million USD in 2019 and stability around 196 million USD in 2020. In 2021, there was a notable increase to 363 million USD, approaching the 2018 level. This pattern suggests variability in taxable income, tax rates, or tax planning outcomes over the years.

Cash Operating Taxes

The cash operating taxes show a different pattern characterized by an initial decrease from 471 million USD in 2017 to 288 million USD in 2018 and a further decline to 255 million USD in 2019. In 2020, the figure rose slightly to 278 million USD, followed by a sharp increase to 775 million USD in 2021, which represents a nearly threefold jump compared to the previous year. This sharp rise in 2021 might reflect changes in operational profitability, tax timing differences, or alterations in cash tax policy or payments.

Overall, while income tax provision levels remained relatively volatile with peaks in 2018 and 2021, cash operating taxes demonstrated a steady decline until 2019, a minor uptick in 2020, and a significant surge in 2021. The disparity between the trends in provision and cash taxes in recent years may indicate differences in accrued versus actual cash tax payments, suggesting the influence of tax deferrals, credits, or adjustments impacting cash flow differently from the provision expense.

The financial data reveals several significant trends in the company’s capital structure and financial positioning over the five-year period.

Total reported debt & leases

The reported debt and leases displayed an increasing trend from 2017 through 2019, rising sharply from $5,266 million in 2017 to $22,642 million in 2019. This substantial increase indicates a significant leveraging or financing activity during that period. In 2020 and 2021, the reported debt & leases figures stabilized somewhat, with slight decreases and then a modest increase ending at $21,974 million in 2021, suggesting a relatively stable level of debt in the most recent years considered.

Total shareholders’ equity

Shareholders’ equity experienced a decline from $2,731 million in 2017 to $2,293 million in 2018, followed by a dramatic increase to $32,979 million in 2019. This surge aligns with the observed rise in debt, which may reflect an equity issuance, revaluation, or comprehensive income increase that boosted equity considerably. Subsequently, shareholders’ equity declined slightly but remained high at $32,330 million in 2020 and then decreased further to $30,952 million in 2021. Despite these decreases, equity levels remain substantially higher than the initial 2017-2018 amounts.

Invested capital

Invested capital followed a trend similar to that of total debt and shareholders’ equity. Beginning at $9,201 million in 2017 and increasing modestly to $9,909 million in 2018, it then surged to $62,514 million by the end of 2019. This jump reflects the substantial changes in both debt and equity levels noted previously. Despite the surge, invested capital slightly decreased in 2020 and 2021, ending at $59,700 million in 2021, suggesting moderate adjustments or repayments affecting the overall invested capital base during these last two years.

In summary, the data illustrates a period of significant capital restructuring or acquisition activity around 2019, characterized by sharp increases in both debt and equity components. Following this peak, the company maintained relatively stable but high financial leverage and equity levels, with minor declines in invested capital and equity in recent years. This pattern may indicate strategic investments or financing followed by a phase of consolidation or optimization of the capital structure.

Economic Profit

Economic profit exhibited a positive trend in the initial two years, increasing from 118 million US dollars in 2017 to 178 million US dollars in 2018. However, starting in 2019, the company experienced a significant downturn, recording a substantial economic loss of -5070 million US dollars. This negative trend continued through 2020 and 2021, with losses slightly decreasing but remaining considerably large at -4695 million and -4320 million US dollars, respectively.

Invested Capital

Invested capital showed moderate growth from 2017 to 2018, rising from 9201 million to 9909 million US dollars. Thereafter, there was a pronounced increase in 2019, with invested capital surging to 62514 million US dollars. This elevated level of capital persisted with slight decreases in the following years, measuring 60165 million in 2020 and 59700 million US dollars in 2021.

Economic Spread Ratio

The economic spread ratio followed a trajectory similar to economic profit. It increased from 1.28% in 2017 to 1.8% in 2018, indicating improved returns relative to the capital base. However, from 2019 onwards, the ratio turned negative, reflecting the economic losses noted previously, with values of -8.11%, -7.8%, and -7.24% in 2019, 2020, and 2021 respectively. This trend suggests that the returns on invested capital were substantially below the cost of capital during these years.

Summary

Overall, the data indicates a clear shift from profitability to significant losses beginning in 2019, despite a large increase and sustained high levels of invested capital. The negative figures in both economic profit and economic spread ratio from 2019 onwards suggest deteriorating financial efficiency and challenges in generating value above the cost of capital during the subsequent years.

Adjusted Revenue

The adjusted revenue demonstrated a significant upward trend over the analyzed period. Starting at $5,765 million in 2017, it remained relatively stable in 2018 before experiencing substantial growth in subsequent years, reaching $16,303 million by 2021. This represents nearly a threefold increase from the initial value, indicating strong revenue expansion.

Economic Profit

The economic profit exhibited notable volatility and a downward trend. Initially positive at $118 million in 2017 and increasing to $178 million in 2018, it sharply declined into negative territory from 2019 onward. The losses expanded considerably, with economic profit falling to -$5,070 million in 2019 and remaining significantly negative through 2020 and 2021, though showing a slight improvement in the degree of loss by 2021.

Economic Profit Margin

The economic profit margin followed a pattern consistent with the economic profit figures. It started at a modest positive rate of 2.04% in 2017, increased to 3.15% in 2018, and then experienced a steep decline into negative margins starting 2019. The margin reached -48.92% in 2019 and improved somewhat, but remained deeply negative at -26.5% by 2021. This indicates that despite revenue growth, the company struggled to generate positive economic returns relative to its invested capital during this period.

Overall Analysis

The company’s financial performance presents a paradox of growing revenues accompanied by deteriorating economic profitability. While adjusted revenues surged from 2019 onwards, economic profits and margins plunged sharply into negative figures, suggesting increased costs, investments, or other charges impacting economic value creation. The improvement in economic profit margin from its lowest points in 2019 and 2020 to 2021 indicates potential early signs of stabilization or efficiency gains, albeit still at a loss. The data underscores a need for further investigation into cost structures and capital utilization to improve economic profitability despite robust top-line growth.