Illumina Inc. (NASDAQ:ILMN)

The financial data reveals several notable trends over the five-year period analyzed.

Net Operating Profit After Taxes (NOPAT)

The NOPAT showed a strong growth trajectory from 2016 through 2019, increasing from $453 million to $957 million. However, in 2020, there was a significant decline to $593 million, indicating a reversal of the earlier positive trend.

Cost of Capital

The cost of capital remained relatively stable but exhibited a gradual upward trend, rising from 14.58% in 2016 to 15.16% in 2020. This slight increase implies a growing expense for financing invested capital.

Invested Capital

Invested capital steadily increased from $2,874 million in 2016 to $4,997 million in 2019, reflecting expansion or increased investment. A slight decrease was observed in 2020 to $4,907 million, which may suggest divestments or adjustments in asset allocation.

Economic Profit

Economic profit experienced notable fluctuations. It rose sharply from $34 million in 2016 to a peak of $211 million in 2019, indicating value creation during this period. However, in 2020, economic profit turned negative, reaching -$151 million, which points to value destruction possibly due to the declining NOPAT and higher cost of capital relative to invested capital.

Overall, the data shows positive performance and value creation from 2016 through 2019, characterized by growing profitability and invested capital. The year 2020 marks a downturn with decreased profitability and a negative economic profit despite only a slight reduction in invested capital and a continued increase in cost of capital. This suggests challenges in maintaining efficient returns on investments under increasing capital costs during the last period analyzed.

Net Income Attributable to Illumina Stockholders

The net income demonstrated an overall upward trend from 2016 to 2019, starting at 463 million US dollars in 2016 and reaching a peak of 1002 million US dollars in 2019. This represents a substantial growth over the four-year period. However, in 2020, there was a notable decline to 656 million US dollars, which indicates a reversal of the previous growth trend.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a similar pattern to net income, increasing consistently from 453 million US dollars in 2016 to 957 million US dollars in 2019. This increase reflects improving operational efficiency and profitability. However, in 2020, NOPAT decreased to 593 million US dollars, signaling a significant downturn in operating profitability in that year.

Overall Observations

Both net income and NOPAT showed strong positive growth through 2019, indicating solid financial performance and effective management of operational costs and taxes. The decline observed in 2020 suggests that external factors or internal challenges may have adversely affected profitability. The 2020 results warrant further investigation to identify specific causes and to assess the sustainability of future earnings.

The financial data reveals the trends in tax-related expenses over five fiscal years ending from 2016 to 2020. Both the provision for income taxes and cash operating taxes have exhibited fluctuations throughout this period.

Provision for Income Taxes

This item showed a significant increase from $133 million in 2016 to a peak of $365 million in 2017. Subsequently, it decreased sharply to $112 million in 2018 and remained relatively stable in 2019 with a slight increase to $128 million. In 2020, there was a notable rise again to $200 million.

Cash Operating Taxes

Cash operating taxes also followed a somewhat similar pattern, increasing from $140 million in 2016 to $344 million in 2017. After 2017, there was a decline to $133 million in 2018, followed by a further decrease to $114 million in 2019. In 2020, cash operating taxes dropped dramatically to $35 million, reaching the lowest level in the five-year span.

Overall, both tax provisions and cash operating taxes peaked sharply in 2017, followed by declines in subsequent years. However, while the provision for income taxes saw a rebound in 2020, cash operating taxes continued to decline substantially. This divergence in 2020 may indicate changes in tax payment timing, tax strategy, or the recognition of deferred tax liabilities.

The financial data indicates several notable trends in the company's capital structure and financing components over the five-year period ending December 31, 2020.

Total reported debt & leases

This metric exhibits moderate fluctuations, beginning at $1,795 million in 2016, rising to a peak of $2,599 million in 2018, before decreasing to approximately $1,881 million in 2019 and stabilizing around $1,906 million in 2020. The increase through 2018 suggests a period of increased borrowing or lease commitments, followed by a reduction implying possible debt repayment or lease adjustments.

Total stockholders’ equity

Equity shows a consistent, steady increase year-over-year, rising from $2,197 million in 2016 to $4,694 million in 2020. The equity nearly doubled over the period, reflecting retained earnings growth, possible capital raises, or accumulated comprehensive income, indicating strengthening financial stability and increased shareholder value.

Invested capital

Invested capital generally trends upward from $2,874 million in 2016 to a peak of $4,997 million in 2019, with a slight decrease to $4,907 million in 2020. This overall growth reflects increased funding employed in the business, either through equity or liabilities, aligning with growth or expansion strategies. The small decline in 2020 suggests a minor contraction or adjustment in the capital base.

Overall, the company demonstrates a strengthening equity base coupled with management of debt levels, maintaining total invested capital at elevated levels consistent with potential expansion or operational scaling. The reduction in debt after 2018, alongside rising equity, may suggest a strategic shift towards lower leverage, improving financial flexibility.

The financial performance over the five-year period exhibits notable fluctuations in economic profit, invested capital, and economic spread ratio.

Economic Profit

Economic profit showed a positive trend from 2016 to 2019, rising from 34 million US dollars in 2016 to a peak of 211 million US dollars in 2019. This demonstrates consistent value creation during these years. However, in 2020, economic profit turned negative, declining sharply to -151 million US dollars, indicating a significant deterioration in profitability or value destruction in that year.

Invested Capital

Invested capital steadily increased throughout most of the period. Starting from 2,874 million US dollars in 2016, it grew to 4,997 million US dollars by the end of 2019, reflecting ongoing capital deployment or asset accumulation. In 2020, invested capital slightly decreased to 4,907 million US dollars, suggesting either divestitures or asset impairments occurred.

Economic Spread Ratio

The economic spread ratio, which measures economic profit relative to invested capital, improved markedly from 1.19% in 2016 to a high of 5.85% in 2017, then gradually declined to 4.22% by 2019. The positive values indicate that returns exceeded the cost of capital. However, a sharp reversal occurred in 2020 when the ratio turned negative to -3.08%, aligning with the decline in economic profit and signaling that the company’s returns fell below its cost of capital in that year.

Overall, the data indicates the company effectively generated increasing economic profit and returns on invested capital through most of the observed period, supported by sustained capital investment. The downturn in 2020, both in absolute economic profit and relative returns, points to challenges that may have impaired value creation, offsetting prior positive trends.

Over the analyzed period, revenue demonstrated an overall upward trend from 2016 to 2019, increasing from 2,398 million US dollars to 3,543 million US dollars. However, in 2020, there was a decline in revenue to 3,239 million US dollars, indicating a potential disruption or slowdown in business activities during that year.

Economic profit showed significant volatility throughout the periods. Initially, it increased from 34 million US dollars in 2016 to a peak of 210 million in 2017. Following this peak, economic profit remained relatively stable with minor fluctuations in 2018 and 2019, recording 189 million and 211 million US dollars respectively. However, in 2020, economic profit turned negative, reaching -151 million US dollars, which suggests a substantial deterioration in profitability, potentially due to increased costs or reduced operational efficiency.

The economic profit margin, expressing economic profit as a percentage of revenue, mirrored the fluctuations observed in economic profit. It rose sharply from 1.43% in 2016 to 7.65% in 2017, before declining slightly to 5.67% and 5.95% in 2018 and 2019 respectively. In 2020, this metric turned negative, recording -4.67%, underscoring the impact of adverse factors on the company's value creation during that year.

Revenue Trend

Consistent growth over the first four years followed by a drop in the final year.

Economic Profit Dynamics

Marked increase to a peak in 2017, stable levels through 2019, then a sharp decline resulting in negative profits in 2020.

Economic Profit Margin Pattern

Growth to a high margin in 2017, slightly declining margins thereafter, culminating in a negative margin in 2020.

Overall, the data indicate strong growth and enhanced profitability until 2019, after which the financial performance deteriorated notably in 2020. The negative economic profit and margin in the last year suggest challenges that significantly impacted economic value generation, warranting further investigation into the underlying causes.