Fiserv Inc. (NASDAQ:FISV)

The financial data over the five-year period reveals notable trends concerning profitability and capital efficiency.

Net Operating Profit After Taxes (NOPAT)

NOPAT has shown a steady increase from 2017 through 2021. The values rose from $1,176 million in 2017 to $1,797 million in 2021, indicating consistent growth in the company's core operating profitability.

Invested Capital

Invested capital experienced substantial fluctuation. It increased moderately from $9,201 million in 2017 to $9,909 million in 2018, before surging significantly to $62,514 million in 2019. Thereafter, it slightly declined and stabilized in 2020 and 2021 around $60,165 million and $59,700 million respectively. This sharp increase in invested capital between 2018 and 2019 suggests a major investment or acquisition during that period.

Return on Invested Capital (ROIC)

ROIC exhibited a decline despite the growth in NOPAT. It started at 12.78% in 2017 and slightly increased to 13.35% in 2018. Subsequently, there was a significant drop to 2.5% in 2019, followed by marginal improvement to 3.01% in 2021. This declining trend highlights that the returns generated relative to the increased invested capital decreased notably after 2018, reflecting lower capital efficiency likely due to the surge in invested capital.

Overall, while the company improved its operating profits consistently, the sharp rise in invested capital around 2019 was not matched by proportional returns, leading to a marked deterioration in capital efficiency as reflected by the declining ROIC.

Operating Profit Margin (OPM)

The operating profit margin showed a declining trend from 28.56% in 2017 to 13.42% in 2020, indicating a significant reduction in operational profitability over these years. In 2021, there was a modest recovery to 15.78%, yet the margin remained considerably below the levels observed in 2017 and 2018.

Turnover of Capital (TO)

The turnover of capital ratio also experienced a marked decrease, dropping from 0.63 in 2017 to 0.17 in 2019. Following this low point, the ratio slightly improved to 0.27 by 2021, but it remained substantially lower than the initial years, reflecting a reduced efficiency in capital utilization over the period.

1 – Effective Cash Tax Rate (CTR)

This metric demonstrated a high and relatively stable trend, starting at 71.42% in 2017 and increasing to over 85% in both 2019 and 2020, before declining to 69.88% in 2021. These fluctuations indicate variability in the effective tax burden, with the highest tax impact occurring during 2018 to 2020.

Return on Invested Capital (ROIC)

The return on invested capital declined substantially from 12.78% in 2017 to a low of 2.5% in 2019. Despite marginal improvements to 3.01% by 2021, the ratio remained well below the initial values. This movement suggests a significant decrease in the company’s ability to generate returns from its invested capital over the analyzed time frame.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes exhibited a generally increasing trend over the analyzed period. Starting at $1,646 million in 2017, the figure slightly decreased in 2018 to $1,610 million, followed by consistent growth through subsequent years, reaching $2,572 million by the end of 2021. This suggests improved operational efficiency and profitability over time, particularly notable from 2019 onwards.

Adjusted Revenue

Adjusted revenue showed significant expansion across the years reviewed. Beginning at $5,765 million in 2017, revenue remained relatively stable in 2018. However, a considerable jump occurred in 2019, with revenue nearly doubling compared to earlier years to $10,365 million. This upward momentum continued into 2020 and 2021, reaching $16,303 million. The sharp increase in revenue from 2019 onward indicates a period of rapid business growth or substantial changes in business scale or operations.

Operating Profit Margin (OPM)

The operating profit margin declined steadily from 2017 to 2020. Initially, margins were strong, at approximately 28.56% in 2017 and 28.43% in 2018. However, this percentage dropped sharply to 17.56% in 2019 and further decreased to 13.42% in 2020. A slight recovery occurred in 2021, with the margin rising to 15.78%. Despite the improvement in 2021, the OPM remained well below the levels seen in 2017 and 2018. This reduction suggests increasing costs relative to revenue or changes in the profit structure, potentially reflecting the impact of expanded revenues not matched by proportional profit increases.

The financial data reveals notable trends over the five-year period under review. There is a significant increase in adjusted revenue, which grew from $5,765 million in 2017 to $16,303 million in 2021. This represents nearly a threefold increase, indicating considerable expansion in the company's revenue-generating capacity.

Invested capital shows a different pattern, with a gradual increase from $9,201 million in 2017 to $9,909 million in 2018, followed by a substantial jump to $62,514 million in 2019. After 2019, the invested capital decreases slightly to $60,165 million in 2020 and further to $59,700 million in 2021. This abrupt increase in 2019 suggests a major investment or acquisition during that year, which subsequently stabilizes around the $60 billion mark.

The turnover of capital (TO) ratio, which measures the efficiency with which the invested capital generates revenue, decreased markedly from 0.63 in 2017 to 0.17 in 2019. This sharp decline coincides with the large increase in invested capital, implying that the new capital investments did not immediately translate into proportionate revenue growth. However, from 2019 onwards, the TO ratio improves slightly to 0.25 in 2020 and 0.27 in 2021, suggesting a gradual enhancement in capital utilization efficiency as the company integrates the investments into its operations.

Overall, the financial trends point to a period of significant investment accompanied by strong revenue growth, albeit with an initial reduction in capital turnover efficiency. The gradual recovery in turnover ratio alongside growing revenues suggests positive momentum towards better capital efficiency in the latter years.

Cash Operating Taxes

The cash operating taxes exhibited a fluctuating pattern over the analyzed period. Beginning at $471 million at the end of 2017, there was a notable decrease to $288 million in 2018, followed by a continued decline to $255 million in 2019. A slight increase was observed in 2020 to $278 million, culminating in a substantial rise to $775 million by the end of 2021. This latter increase more than doubled the preceding year's figure, marking a significant upward shift in tax payments.

Net Operating Profit Before Taxes (NOPBT)

Net operating profit before taxes showed a consistent growth trajectory throughout the period. Starting from $1,646 million in 2017, the figure slightly declined to $1,610 million in 2018 but then steadily increased year-over-year, reaching $1,820 million in 2019, $2,005 million in 2020, and peaking at $2,572 million in 2021. The compound trend reflects a healthy expansion of operating profits before taxation.

Effective Cash Tax Rate (CTR)

The effective cash tax rate demonstrated a downward trend from 2017 through 2020, with rates falling from 28.58% to 13.84%. This decline suggests improved tax efficiency or reduced tax burdens during these years. However, in 2021, the tax rate sharply increased to 30.12%, surpassing the initial 2017 rate. This reversal may indicate changes in tax policies, profitability compositions, or other factors affecting the tax expense.

Overall Insights

The data reveals that while net operating profits progressively increased, the effective cash tax rate decreased initially before rising sharply in the final year. This pattern correlates with the trends in cash operating taxes, which remained relatively low during the years of reduced tax rates but escalated significantly in 2021 alongside the rise in both profits and tax rate. The year 2021 stands out as a marked shift in the tax landscape and cash tax outflows for the company, potentially reflecting external fiscal changes or internal financial strategies.