Illumina Inc. (NASDAQ:ILMN)

The financial data reveals several notable trends in profitability and leverage over the five-year period ending in 2020.

Return on Assets (ROA)

The ROA shows a fluctuating trend, initially increasing from 10.81% in 2016 to a peak of 13.81% in 2017, followed by a slight decrease to 11.87% in 2018. It then rises again to 13.7% in 2019 before declining significantly to 8.65% in 2020. This suggests variance in asset efficiency with a marked decrease in profitability relative to assets in the most recent year.

Financial Leverage

The financial leverage ratio steadily decreases from 1.95 in 2016 to 1.59 in 2019, indicating a gradual reduction in the use of debt relative to equity. However, there is a slight uptick to 1.62 in 2020, suggesting a minor increase in leverage during that year.

Return on Equity (ROE)

ROE trends mirror the ROA pattern with an increase from 21.06% in 2016 to a high of 26.41% in 2017. It then declines to 21.98% in 2018 and remains relatively stable in 2019 at 21.72%. In 2020, there is a significant drop to 13.98%, indicating a substantial decrease in shareholder returns despite the relatively stable leverage compared to prior years.

Overall, the data indicates a strong performance in 2017 followed by volatility in asset profitability and equity returns, culminating in a notable decline in 2020. The reduction in financial leverage over most of the period may reflect a conservative approach to financing, though the slight increase in the final year coupled with the decline in profitability measures warrants further examination.

Net Profit Margin

The net profit margin exhibited variability over the analyzed period. It increased significantly from 19.29% in 2016 to a peak of 28.28% in 2019, indicating improved profitability efficiency. However, this was followed by a notable decline to 20.25% in 2020, suggesting a reduction in profit generated per dollar of revenue during the latest year.

Asset Turnover

Asset turnover demonstrated a gradual downward trend, decreasing from 0.56 in 2016 to 0.43 in 2020. This indicates a diminishing efficiency in utilizing assets to generate sales over the years, with a consistent reduction suggesting either slower sales growth relative to asset base or increased asset holdings without proportional sales increases.

Financial Leverage

Financial leverage decreased from 1.95 in 2016 to 1.59 in 2019, reflecting a reduction in the use of debt relative to equity. In 2020, it showed a slight uptick to 1.62 but remained below the levels seen in prior years, indicating a relatively conservative capital structure with reduced reliance on leverage over the period.

Return on Equity (ROE)

ROE experienced fluctuations, increasing from 21.06% in 2016 to 26.41% in 2017, followed by a decline to 13.98% in 2020. Despite some recovery in intermediate years, the overall trend towards the end of the period is downward, signaling a reduction in the company’s ability to generate returns on shareholders’ equity. The decline in 2020 is particularly significant, paralleling the decrease seen in net profit margin and possibly impacted by the reduced profitability and asset utilization.

The analysis of the financial ratios over the period from December 31, 2016, to December 31, 2020, reveals various trends in operational efficiency, profitability, and leverage.

Tax Burden

The tax burden ratio exhibits some volatility over the years. It starts at 0.78 in 2016, decreases to 0.67 in 2017, indicating a lower portion of earnings paid as tax, then rises sharply to 0.88 in 2018 and 0.89 in 2019 before decreasing again to 0.77 in 2020. This fluctuation suggests variability in tax expenses relative to pre-tax earnings during the period.

Interest Burden

This ratio remains relatively stable, fluctuating slightly between 0.94 and 0.97 throughout the five-year period. This stability implies consistent management of interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin shows notable volatility. It peaks at 40.99% in 2017 following an initial 26.22% in 2016, then declines to 29.85% in 2018. A slight recovery occurs in 2019 to 33.36%, followed by a drop to 27.94% in 2020. Overall, the margin reflects fluctuations in operational profitability with the highest efficiency in 2017 and subsequent moderation.

Asset Turnover

Asset turnover steadily declines from 0.56 in 2016 to 0.43 in 2020. This indicates a gradual reduction in the efficiency with which the company utilizes its assets to generate sales over the years.

Financial Leverage

Financial leverage decreases from 1.95 in 2016 to 1.59 in 2019, showing a tendency toward reduced reliance on debt or increased equity financing, before slightly rising to 1.62 in 2020. This suggests a generally conservative approach to leveraging across the period with marginal adjustment in the final year.

Return on Equity (ROE)

ROE rises from 21.06% in 2016 to a peak of 26.41% in 2017, then declines over the subsequent years to 13.98% in 2020. This trend underlines a decrease in the overall profitability generated from shareholders' equity in recent years, with significant reduction observed in the final year.

In summary, the data present a scenario where operational profitability and efficiency have experienced fluctuations and general decline, especially in asset utilization and return on equity. The company maintained stable interest management and varied its tax burden over time. Financial leverage was gradually reduced, highlighting a cautious stance on financial risk, although the impact on shareholder returns diminished notably by 2020.

Net Profit Margin

The net profit margin exhibited fluctuations across the reported periods. Starting at 19.29% in 2016, it increased significantly to reach a peak of 28.28% in 2019. However, in 2020, the margin experienced a notable decline to 20.25%, indicating a reduction in profitability relative to sales compared to the previous year.

Asset Turnover

The asset turnover ratio demonstrated a consistent downward trend throughout the five-year span. Beginning at 0.56 in 2016, it gradually decreased each year, ending at 0.43 in 2020. This decline suggests a decreasing efficiency in using assets to generate revenue over time.

Return on Assets (ROA)

Return on assets mirrored trends observed in net profit margin and asset turnover. The ROA increased from 10.81% in 2016 to a high of 13.7% in 2019, reflecting improved profitability relative to asset base during these years. Nonetheless, in 2020, ROA dropped substantially to 8.65%, indicating a significant reduction in asset profitability.

Tax Burden

The tax burden ratio exhibited fluctuations over the five-year period. It decreased from 0.78 in 2016 to 0.67 in 2017, indicating a relatively lower tax expense relative to pre-tax income that year. It then increased significantly to 0.88 in 2018 and remained nearly stable at 0.89 in 2019 before dropping again to 0.77 in 2020. This pattern suggests some variability in tax impacts affecting net income over the examined period.

Interest Burden

The interest burden ratio remained relatively stable, hovering close to 0.95 throughout all years. This consistency indicates a stable interest expense in relation to EBIT, suggesting limited changes in the company’s debt service costs over time.

EBIT Margin

The EBIT margin saw notable volatility. It rose sharply from 26.22% in 2016 to a peak of 40.99% in 2017, then declined to 29.85% in 2018. A moderate recovery occurred in 2019 to 33.36%, followed by a further decline to 27.94% in 2020. This fluctuation suggests varying operational efficiency or cost structure changes impacting earnings before interest and taxes.

Asset Turnover

The asset turnover ratio demonstrated a gradual and consistent decline from 0.56 in 2016 to 0.43 in 2020. This trend implies decreasing efficiency in generating sales from the company's asset base over the five years.

Return on Assets (ROA)

ROA reflected a pattern of increase and subsequent decline. Starting at 10.81% in 2016, it peaked at 13.81% in 2017, followed by a decline to 11.87% in 2018 and a recovery to 13.7% in 2019. However, in 2020, ROA dropped substantially to 8.65%. The movement in ROA appears influenced by changes in EBIT margin, asset turnover, and tax burden, indicating variability in overall profitability relative to total assets.

Tax Burden Trend

The tax burden ratio exhibited fluctuations over the five-year period. It decreased from 0.78 in 2016 to a low of 0.67 in 2017, indicating a reduction in tax impact during that year. Subsequently, it increased significantly to 0.88 in 2018 and remained relatively high at 0.89 in 2019 before declining again to 0.77 in 2020. Overall, the ratio shows variability with a tendency to peak toward the middle of the period.

Interest Burden Trend

The interest burden ratio remained relatively stable throughout the observed years, ranging narrowly between 0.94 and 0.97. This stability suggests consistent management of interest expenses relative to earnings before interest and taxes over the period, with no significant upward or downward shifts.

EBIT Margin Trend

The EBIT margin experienced considerable volatility. It started at 26.22% in 2016 and surged to a peak of 40.99% in 2017, indicating significant operational profitability improvement. However, it dropped sharply to 29.85% in 2018, followed by a moderate increase to 33.36% in 2019. In 2020, the margin declined again to 27.94%. This pattern indicates fluctuating earnings performance before interest and taxes, with the highest operational efficiency observed in 2017.

Net Profit Margin Trend

The net profit margin generally followed the pattern of EBIT margin but with less pronounced peaks. Starting from 19.29% in 2016, it increased to 26.38% in 2017, then slightly decreased to 24.78% in 2018. It rebounded to 28.28% in 2019 before falling substantially to 20.25% in 2020. The decrease in 2020 indicates increased costs or reduced revenues affecting bottom-line profitability despite previous improvements.