Fortinet Inc. (NASDAQ:FTNT)

The financial data reveals a consistent upward trajectory in several key metrics over the five-year period ending December 31, 2022.

Net Operating Profit After Taxes (NOPAT)

NOPAT has shown substantial growth from 554,165 thousand US dollars in 2018 to 1,822,720 thousand US dollars in 2022. This growth indicates an expanding profitability of the company’s core operations. The increase is steady, with the most significant increments observed from 2020 onwards, suggesting improvements in operational efficiency or revenue generation capabilities during this period.

Invested Capital

The invested capital has increased from 1,886,300 thousand US dollars in 2018 to 4,282,000 thousand US dollars in 2022. This growth reflects significant reinvestment in the company’s resources, possibly indicating expansion, capital expenditures, or acquisitions. The most pronounced jump occurred between 2020 and 2021, marking a period of accelerated capital deployment.

Return on Invested Capital (ROIC)

ROIC measures the efficiency with which invested capital generates returns after taxes. The ratio improved substantially from 29.38% in 2018 up to 43.55% in 2020. Following 2020, the ROIC experienced a slight decrease to 41.72% in 2021, with a modest recovery to 42.57% in 2022. Despite the decrease after 2020, the ROIC remains significantly higher than the initial years, indicating sustained strong capital efficiency.

Overall, the trends suggest that the company has effectively grown its operating profit and capital base while maintaining high levels of return on its invested capital. The data points to disciplined capital management combined with consistent operational improvements over the period analyzed.

Operating Profit Margin (OPM)

The operating profit margin demonstrates a consistent upward trend from 26.72% in 2018 to 37.11% in 2022. This steady increase indicates improving operational efficiency and profitability over the period.

Turnover of Capital (TO)

The turnover of capital ratio shows some variability but an overall increasing pattern. Starting at 1.14 in 2018, it rose to a peak of 1.39 in 2020, before slightly decreasing to 1.28 in 2021, then increasing again to 1.31 in 2022. This suggests fluctuations in asset utilization but generally improved effectiveness in generating revenue from capital.

1 – Effective Cash Tax Rate (CTR)

There is a downward trend in the 1 – effective cash tax rate, declining from 96.39% in 2018 to 87.63% in 2022. This reduction implies a rising effective cash tax payment relative to earnings, which could impact net profitability and cash flows.

Return on Invested Capital (ROIC)

The return on invested capital exhibits strong performance with an increase from 29.38% in 2018 to a peak of 43.55% in 2020, followed by a slight decline to 41.72% in 2021 and a minor recovery to 42.57% in 2022. Overall, ROIC remains high, reflecting effective use of invested capital to generate returns.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes has exhibited a consistent upward trend over the five-year period. It increased from approximately 574.9 million USD in 2018 to about 2.08 billion USD in 2022. This represents a significant growth in profitability, indicating enhanced operational efficiency or increased revenue generation capabilities.

Adjusted Revenue

Adjusted revenue also showed robust growth throughout the timeframe. Starting at around 2.15 billion USD in 2018, revenue increased steadily each year, reaching approximately 5.6 billion USD in 2022. This steady increase suggests successful market expansion, higher sales volumes, or improved pricing strategies.

Operating Profit Margin (OPM)

The operating profit margin steadily improved from 26.72% in 2018 to 37.11% in 2022. This upward trend indicates enhanced operational efficiency and cost management, as the company has been able to convert a larger portion of its revenue into operating profit over time.

Overall Analysis

The combination of rising adjusted revenue and increasing operating profit margin has driven the substantial growth in net operating profit before taxes. The consistent improvements across all three metrics suggest that the company has been successfully scaling its business while managing costs effectively. The trend indicates strong financial health and operational performance over the reviewed period.

Adjusted Revenue

The adjusted revenue demonstrates a consistent upward trend over the five-year period. Starting at approximately 2.15 billion US dollars in 2018, it increased steadily each year, reaching around 5.60 billion US dollars by the end of 2022. This indicates a strong and sustained growth trajectory, with the largest annual increments occurring between 2020 and 2022.

Invested Capital

Invested capital has shown a general increasing pattern, beginning at about 1.89 billion US dollars in 2018 and rising to approximately 4.28 billion US dollars by 2022. While growth was relatively moderate up to 2020, there was a significant jump in 2021, followed by continued growth in 2022. This suggests increased investment in assets or resources over time, potentially to support or drive revenue growth.

Turnover of Capital (TO)

The turnover of capital ratio fluctuated moderately throughout the period. It started at 1.14 in 2018, improved slightly to 1.17 in 2019, then increased more notably to 1.39 in 2020. However, it declined to 1.28 in 2021 before rising again slightly to 1.31 in 2022. These variations indicate some changes in efficiency with which the company utilized its invested capital to generate revenue. Despite fluctuations, the turnover ratio remained above 1.1, reflecting ongoing reasonable capital utilization efficiency.

Overall Analysis

The data reflects a company experiencing significant growth in both revenue and invested capital over this five-year period. Increasing revenue outpaces the growth in invested capital, contributing to a generally stable and healthy turnover of capital ratio. The large increase in invested capital during 2021 may correspond to strategic investments aimed at sustaining revenue growth. Although the turnover ratio sees some variation, it indicates effective, though slightly variable, asset utilization. The trends suggest an expanding operation with efficient, though slightly varying, capital management.

Cash Operating Taxes

The cash operating taxes have shown a significant increasing trend over the analyzed period. Starting from $20,735 thousand in 2018, the figure decreased to $13,846 thousand in 2019 but then increased steadily each year, reaching $257,229 thousand by 2022. This represents a substantial rise, especially in the last two years.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes has exhibited a consistent and strong upward trend. It increased from $574,900 thousand in 2018 to $2,079,950 thousand by 2022. The growth appears accelerated after 2019, showing substantial increases each year, indicative of robust operational performance and profitability expansion.

Effective Cash Tax Rate (CTR)

The effective cash tax rate has varied over the years but generally increased throughout the period. It started relatively low at 3.61% in 2018 and declined to 1.76% in 2019. However, from 2020 onwards, it showed a rising pattern, reaching 12.37% in 2022. This upward trend suggests that the proportion of taxes paid relative to operating profit has grown significantly.

Summary Insights

The data indicates that despite growing profitability as indicated by rising NOPBT, cash operating taxes have substantially increased both in absolute terms and as a percentage of profit as evidenced by the effective cash tax rate. This could reflect changes in tax policies, higher taxable income, or adjustments in tax planning strategies. The consistent strong growth in operating profit before taxes is a positive indicator of financial health and operational success, although the increasing tax burden may have implications for future net profitability and cash flow management.