Fiserv Inc. (NASDAQ:FISV)

The financial data reveals several significant trends regarding profitability, capital efficiency, and economic performance over the five-year period analyzed.

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a consistent upward trajectory from 2017 through 2021. Starting at $1,176 million in 2017, it increases annually to $1,797 million by 2021. This steady growth indicates improving operational profitability before the impact of financing and taxes.

Cost of Capital

The cost of capital demonstrates a slight declining trend over the period, moving from 11.49% in 2017 to 10.24% in 2021. This gradual reduction potentially reflects lower perceived risk or more favorable financing conditions, which can benefit overall financial performance.

Invested Capital

Invested capital exhibits a pronounced increase from 2017 to 2019, surging from approximately $9.2 billion to over $62.5 billion. After reaching this peak in 2019, it slightly decreases but remains very high relative to earlier years, settling near $59.7 billion by 2021. This substantial increase suggests significant capital deployment, possibly due to acquisitions, capital expenditures, or reclassification of assets.

Economic Profit

Economic profit starts positively in 2017 and 2018, at $119 million and $180 million respectively, but declines sharply to a large negative value of -$5,063 million in 2019. Although it improves modestly afterward, it remains negative in 2020 and 2021 at approximately -$4,688 million and -$4,313 million, respectively. This indicates that despite rising operating profits, the returns on invested capital are not sufficient to cover the cost of capital, leading to value destruction during these years.

In summary, while operational profits have steadily improved and the cost of capital has decreased slightly, the dramatic increase in invested capital has not translated into positive economic profit since 2019. This suggests inefficiencies in capital deployment or integration challenges that have impacted the ability to generate returns exceeding the cost of capital, resulting in sustained economic losses in the most recent period analyzed.

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.

The financial analysis reveals notable changes in key metrics over the five-year period ending December 31, 2021. The economic profit demonstrates a significant decline, moving from a positive value to substantial negative amounts. Specifically, economic profit increased from 119 million US dollars in 2017 to 180 million in 2018, then sharply decreased to -5,063 million in 2019, followed by a slight recovery to -4,688 million in 2020 and -4,313 million in 2021. This downward trend indicates deteriorating profitability and possibly increasing costs or declining returns relative to invested capital.

Invested capital shows a marked increase from 9,201 million US dollars in 2017 to 9,909 million in 2018, then drastically rises to 62,514 million in 2019. After this peak, invested capital slightly decreases to 60,165 million in 2020 and 59,700 million in 2021. The surge in invested capital between 2018 and 2019 may have contributed to the negative economic profits seen in subsequent years, as the company appears to have deployed significant resources with limited or negative returns.

The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, follows a parallel trend with economic profit. The ratio improves from 1.29% in 2017 to 1.81% in 2018, indicating positive value creation. However, it sharply reverses to negative values thereafter, falling to -8.10% in 2019, and slightly improving to -7.79% in 2020 and -7.23% in 2021. These negative spreads suggest that the company has been generating returns below its cost of capital, thereby destroying shareholder value over this period.

Overall, the data imply a significant shift from modest profitability and efficient capital deployment in 2017-2018 to substantial capital investments accompanied by returns that fail to cover the cost of capital from 2019 through 2021. This situation highlights concerns about the company's investment effectiveness and overall financial performance during the analyzed timeframe.

The financial data over the five-year period reveals notable changes in both revenue generation and economic profitability.

Adjusted Revenue

Adjusted revenue exhibited a downward trend initially from 2017 to 2018, decreasing from 5,765 million US dollars to 5,662 million US dollars. However, beginning in 2019, there was a significant increase, with revenue almost doubling to 10,365 million US dollars. This upward momentum continued strongly through 2020 and 2021, reaching 14,938 million US dollars and 16,303 million US dollars respectively. The trend indicates substantial growth in top-line performance during the latter three years.

Economic Profit

The economic profit figures portray a contrasting scenario. Positive economic profits were recorded in 2017 and 2018, with figures rising from 119 million US dollars to 180 million US dollars, suggesting efficient value creation in these years. However, from 2019 onwards, economic profit turned negative, reflecting considerable economic losses. The deficits are significant, amounting to -5,063 million US dollars in 2019, slightly reducing in magnitude to -4,688 million US dollars in 2020, and then to -4,313 million US dollars in 2021. These values indicate challenges in generating economic value despite increasing revenue.

Economic Profit Margin

The economic profit margin mirrors the movement in economic profit. It was positive but modest in 2017 (2.06%) and improved in 2018 (3.17%). Beginning in 2019, this margin deteriorated substantially, showing large negative percentages: -48.85% in 2019, improving slightly to -31.39% in 2020, and further to -26.46% in 2021. These margins denote that the company’s costs and capital charges may have outpaced revenue growth during the latter period, adversely impacting profitability ratios.

In summary, while adjusted revenue grew markedly from 2019 through 2021, this was accompanied by sharply negative economic profits and profit margins, although there is a modest improvement in these losses over the last two years. The data suggests that although the company's revenue base expanded significantly, it struggled to translate this growth into positive economic value, potentially due to increased costs or capital charges that outstripped revenue gains. The gradual improvement in economic losses from 2019 onward may indicate early signs of operational or strategic adjustments aimed at enhancing economic profitability.