Fiserv Inc. (NASDAQ:FISV)

The analysis of the company's financial data over the five-year period reveals significant changes in several key metrics, illustrating underlying trends in operational performance and capital management.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a consistent upward trend from $1,176 million in 2017 to $1,797 million in 2021. This steady increase suggests improvements in operational efficiency or profitability over time, reflecting the company's growing ability to generate profit from its core operations.

Cost of Capital

The cost of capital exhibits relative stability with minor fluctuations, ranging from a high of 11.54% in 2018 down to 10.24% in 2021. This slight decline indicates a potentially improved risk profile or lower financing costs, which could positively affect investment decisions and valuation.

Invested Capital

Invested capital rises steadily from $9,201 million in 2017 to $9,909 million in 2018 but then experiences a dramatic surge to over $62 billion in 2019, maintaining a similar scale in subsequent years (around $60 billion). This sharp increase denotes a significant asset base expansion, possibly due to acquisitions, large capital investments, or restructuring of balance sheet items.

Economic Profit

Economic profit is positive in 2017 and 2018, at $119 million and $179 million respectively, signaling value creation beyond the cost of capital in these years. However, from 2019 onwards, economic profit turns sharply negative, with large losses exceeding $4 billion annually. This negative economic profit coincides with the substantial increase in invested capital, suggesting that the returns from the expanded asset base have not yet met the cost of capital, leading to a value destruction scenario during this period.

Overall, the company demonstrates increasing operational profits and stable capital costs, but the sharp escalation in invested capital from 2019 is associated with a marked decline in economic profitability. This pattern indicates that the strategic investments or changes leading to the higher capital base have yet to translate into commensurate economic value creation. Close attention to the efficiency and returns on invested capital is essential to understand whether this trend will reverse in the future.

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

The economic profit demonstrated a significant decline over the observed period. Initially, there was a positive economic profit of 119 million USD in 2017, increasing to 179 million USD in 2018. However, starting from 2019, the company experienced substantial negative economic profit values, with losses exceeding 5 billion USD in 2019, followed by slightly reduced losses in 2020 and 2021. This indicates a marked deterioration in economic profitability, suggesting challenges in generating returns above the cost of capital during the latter years.

Invested Capital

Invested capital showed a notable increase from 9.2 billion USD in 2017 to nearly 62.5 billion USD in 2019, representing a significant expansion of the asset base. Following this peak, the invested capital slightly decreased to about 60.2 billion USD in 2020 and remained relatively stable around 59.7 billion USD in 2021. This pattern may reflect considerable investment or acquisition activities up to 2019, with subsequent stabilization or modest divestitures thereafter.

Economic Spread Ratio

The economic spread ratio, which reflects the return on invested capital above the cost of capital, followed a deteriorating trend akin to economic profit. It increased from 1.29% in 2017 to 1.81% in 2018, indicating improved efficiency or profitability. However, from 2019 onward, the ratio turned negative, worsening from -8.1% in 2019 to -7.79% and -7.23% in the subsequent years. This decline points to sustained losses in value generation from invested capital in the latter period.

The analysis of the financial data over the five-year period reveals several significant trends in both profitability and revenue metrics.

Adjusted Revenue

The adjusted revenue showed a moderate decline from 2017 to 2018, decreasing slightly from 5,765 million USD to 5,662 million USD. However, a notable and substantial growth occurred starting in 2019, with figures increasing sharply to 10,365 million USD, followed by continued expansion to 14,938 million USD in 2020 and reaching 16,303 million USD in 2021. This pattern indicates strong revenue growth especially during the latter part of the period.

Economic Profit and Economic Profit Margin

Economic profit displayed a positive result in 2017 and 2018, with values of 119 million USD and 179 million USD, respectively. This positive performance reversed dramatically in 2019, resulting in a substantial economic loss of -5,064 million USD. The negative economic profit persisted in 2020 and 2021, albeit improving slightly to -4,690 million USD and -4,315 million USD. Correspondingly, the economic profit margin dropped from positive margins of 2.06% and 3.17% in the first two years to significant negative margins of -48.86%, -31.39%, and -26.46% in the subsequent three years. This sharp downturn suggests the company experienced considerable inefficiencies or increased costs that outweighed revenue growth during these years.

Insights and Implications

While the company demonstrated robust revenue growth from 2019 onward, the negative economic profit and margin indicate that this growth was not sufficiently profitable, possibly due to higher expenses, investments, or other financial challenges. The gradual improvement in economic profit and margin figures from 2019 to 2021 suggests some progress in managing these adverse effects, but profitability has not yet returned to positive territory. The contrast between increasing revenue and declining economic profit margins highlights a critical area for financial management focus.