Fortinet Inc. (NASDAQ:FTNT)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows a consistent upward trend over the five-year period. Starting from approximately 554 million USD in 2018, the figure increased each year, reaching over 1.82 billion USD by the end of 2022. This represents significant growth, indicating improved operational efficiency or expanded business activities contributing positively to profitability.

Cost of Capital

The cost of capital remained relatively stable throughout the period, hovering around 16.3% in the initial years and slightly decreasing to 16.06% in the last two years. This consistency suggests a stable financial environment or financing structure, with no major fluctuations in the expected return required by investors.

Invested Capital

Invested capital showed a marked increase from approximately 1.89 billion USD in 2018 to over 4.28 billion USD in 2022. There was a moderate rise between 2018 and 2019, a slight dip or stabilization in 2020, followed by substantial growth in 2021 and 2022. This trend indicates increased resources committed to the company's operations, potentially reflecting expansion, acquisitions, or increased asset base.

Economic Profit

Economic profit exhibited strong growth across the timeline, rising from around 247 million USD in 2018 to over 1.13 billion USD in 2022. The increase is consistent and substantial, demonstrating that the company not only improved its net operating profit but also generated returns well above the cost of capital, highlighting enhanced value creation over the period.

Net Income Attributable to Fortinet, Inc.

The net income attributable to the company exhibited a positive growth trend over the five-year period. Starting at 332,200 thousand US dollars in 2018, the figure slightly decreased to 326,500 thousand in 2019. However, from 2019 onwards, a significant upward trajectory is evident, with net income rising to 488,500 thousand in 2020, 606,800 thousand in 2021, and reaching 857,300 thousand in 2022. This progression indicates strong profitability improvement, particularly after 2019.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated a consistent and robust increase during the same timeframe. From 554,165 thousand US dollars in 2018, it climbed steadily each year: 773,545 thousand in 2019, 966,259 thousand in 2020, 1,371,124 thousand in 2021, and culminating at 1,822,720 thousand in 2022. The rate of growth accelerated notably after 2020, reflecting enhanced operating efficiency and/or expansion of core business operations.

Overall Trends and Insights

Both net income and NOPAT depict a healthy and improving financial performance over the five-year span. The initial slight dip in net income in 2019 contrasts with a continuous increase in NOPAT, suggesting operational resilience despite minor fluctuations in net profitability that year. The marked growth in both metrics post-2019 underscores successful strategic execution, greater operational leverage, or favorable market conditions contributing to substantially higher earnings and operating profits by 2022.

Provision for (benefit from) income taxes

The provision for income taxes displayed considerable volatility over the five-year period. Initially, there was a significant income tax benefit of -81,300 thousand US dollars in 2018, indicating a tax gain rather than an expense. This shifted dramatically in 2019, turning into a tax expense of 52,700 thousand US dollars, which then remained relatively stable through 2020 at 53,200 thousand US dollars. In the subsequent years, the provision showed a decreasing trend in magnitude to 14,100 thousand US dollars in 2021, followed by an increase to 30,800 thousand US dollars in 2022. Overall, the data suggests a transition from a tax benefit to consistent tax expenses, with some fluctuations in the expense levels in recent years.

Cash Operating Taxes

Cash operating taxes showed a pronounced upward trend throughout the period examined. Beginning at 20,735 thousand US dollars in 2018, the amount decreased to 13,846 thousand US dollars in 2019, representing a short-term decline. However, from 2019 onwards, cash operating taxes rose sharply every year, reaching 56,940 thousand US dollars in 2020, 108,979 thousand US dollars in 2021, and peaking at 257,229 thousand US dollars in 2022. This consistent increase may indicate growing taxable income, changes in tax strategy, or increased profitability subject to cash tax payments.

Total Reported Debt & Leases

The total reported debt and leases remained relatively stable from 2018 to 2020, fluctuating between 46,100 and 53,100 thousand US dollars. However, there was a significant increase in 2021, with the value rising sharply to 1,055,200 thousand US dollars. This upward trend continued into 2022, with a slight further increase to 1,086,100 thousand US dollars, indicating a large increase in debt and lease obligations in the most recent two years.

Total Stockholders’ Equity (Deficit)

Stockholders’ equity exhibited a rising trend from 2018 through 2019, increasing from 1,010,200 thousand US dollars to 1,321,900 thousand US dollars. In 2020, equity declined sharply to 856,000 thousand US dollars and continued to decrease in 2021 to 781,700 thousand US dollars. The trend culminated in 2022 with a negative equity position of -281,600 thousand US dollars, reflecting a shift from equity surplus to deficit over the five-year period.

Invested Capital

Invested capital increased steadily over the observed period. It rose from 1,886,300 thousand US dollars in 2018 to 2,227,800 thousand US dollars in 2019 and remained close to that level in 2020 at 2,218,800 thousand US dollars. A notable increase occurred in 2021 when invested capital surged to 3,286,100 thousand US dollars, followed by continued growth in 2022 reaching 4,282,000 thousand US dollars. This indicates an expanding capital base, particularly pronounced in the most recent two years.

The financial data presents a clear upward trend in economic profit from 2018 through 2022. Economic profit increased steadily every year, starting at 246,780 thousand US dollars in 2018 and reaching 1,135,055 thousand US dollars by the end of 2022. This consistent growth indicates improving operational performance and value generation over the period analyzed.

Invested capital also showed a rising trend, though with some variability. It grew from 1,886,300 thousand US dollars in 2018 to 2,227,800 thousand US dollars in 2019, slightly declined to 2,218,800 thousand US dollars in 2020, then increased significantly to 3,286,100 thousand US dollars in 2021 and further to 4,282,000 thousand US dollars in 2022. The large increases in 2021 and 2022 suggest substantial capital investment or acquisition activities during these years.

The economic spread ratio, which measures the percentage return on invested capital above cost, followed a generally positive pattern. Starting at 13.08% in 2018, the ratio rose sharply to 18.41% in 2019 and continued to increase to 27.22% in 2020. There was a slight decrease to 25.67% in 2021, but it rebounded to 26.51% in 2022. These figures indicate an improving efficiency in generating returns from invested capital, maintaining a relatively high and stable economic spread in the latest years despite the small dip.

Economic Profit

Demonstrates strong and continuous growth, more than quadrupling over five years.

Invested Capital

Experienced overall increases with minor fluctuation, particularly marked by significant growth in the last two years.

Economic Spread Ratio

Shows improvement and sustained high levels, reflecting effective capital utilization despite a minor dip in 2021.

Overall, the data reflects robust financial performance characterized by growth in economic profit, increased investment, and an efficient use of invested capital resulting in a strong economic spread ratio. The trends suggest effective strategic management aimed at expanding operations while maintaining high profitability relative to capital employed.

Economic Profit Trend

The economic profit shows a consistent and significant upward trajectory over the five-year period. Starting at approximately 247 million USD in 2018, it increased each year to reach over 1.13 billion USD in 2022. This reflects strong growth in the company's value generation from its operations.

Adjusted Revenue Trend

Adjusted revenue also demonstrates robust growth, increasing from about 2.15 billion USD in 2018 to over 5.6 billion USD in 2022. The revenue growth appears to accelerate in the latter years, particularly between 2020 and 2022, indicating expanding business activity and market acceptance.

Economic Profit Margin Analysis

The economic profit margin, defined as the ratio of economic profit to adjusted revenue, has steadily improved from 11.47% in 2018 to 20.25% in 2022. This suggests not only that the company is generating more economic profit but also that it is doing so more efficiently relative to its revenue base. The margin shows incremental gains each year, with a notable jump between 2019 and 2020, and a consistent increase thereafter.

Overall Financial Performance Insights

The combined data indicates a strong and improving financial position. The company's ability to grow both revenue and economic profit simultaneously, while enhancing its profit margin, points to efficient resource utilization and effective cost management. The increasing economic profit margin indicates enhanced profitability beyond mere top-line growth, suggesting favorable operating leverage and potentially improved competitive positioning over the analyzed period.