Illumina Inc. (NASDAQ:ILMN)

Return on Assets (ROA)

The ROA demonstrates a declining trend over the analyzed periods from April 2017 to October 2021. Initially, ROA values are relatively high, peaking at around 16.1% and remaining above 15% in the earlier quarters of 2017. However, from 2018 onward, there is a noticeable decrease with values fluctuating mostly in the 10-13% range. A significant dip occurs around mid-2020, reaching its lowest points near 8.5% before continuing to decline further to about 6% by the last quarter of the data. This suggests a gradual reduction in asset efficiency and profitability over time.

Financial Leverage

The financial leverage ratio remains relatively stable, with minor fluctuations throughout the periods. It starts near 1.8 and shows a slight downward trend towards the end of the records, dropping to approximately 1.42. Occasional small increases and decreases are observed but overall, the leverage indicates a moderate and stable use of debt relative to equity, with a tendency towards a slightly more conservative capital structure in the latest periods.

Return on Equity (ROE)

The ROE follows a downward trajectory similar to the ROA. In early 2017, ROE values peak close to 29%, indicating strong profitability relative to shareholders' equity. Through 2018 and 2019, the ROE declines yet remains above 20%. Starting in 2020, there is a steeper decline, with values falling to below 14% and further to around 8.5% by the latest period. This decline aligns with the reduction in ROA and suggests that returns generated for equity holders have diminished notably over the examined timeframe.

Net Profit Margin

The net profit margin exhibited a declining trend from early 2017 through mid-2018, dropping from approximately 30% to a low near 19%. A partial recovery was observed through 2019, with margins rising back above 28%. However, from 2020 onward, the margin experienced a second downward phase, declining again to around 18-21% by late 2021, indicating weakening profitability relative to revenues over this period.

Asset Turnover

Asset turnover showed a gradual reduction over the analyzed timeframe. Beginning near 0.53 in early 2017, it remained relatively stable until early 2018, after which a consistent downward trend occurred, reaching as low as 0.28 by the last reported quarter of 2021. This suggests diminishing efficiency in using assets to generate sales over time.

Financial Leverage

Financial leverage fluctuated modestly within a range of roughly 1.6 to 1.9 throughout the observation period. Notably, leverage declined after mid-2019 from the upper end of this range toward about 1.4 by late 2021, indicating a possible reduction in debt relative to equity or a shift toward a more conservative capital structure.

Return on Equity (ROE)

Return on equity trend largely mirrored net profit margin movement but with more pronounced changes. Starting near 29% in early 2017, ROE steadily declined to approximately 19% by mid-2018 and briefly stabilized around 21% during 2019. Subsequently, a significant downward trajectory was observed from 2020 onward, culminating in a low near 8.5% by late 2021. This decline reflects diminished overall profitability and effectiveness in generating shareholder returns during this interval.

Overall Insights

Across the periods reviewed, the company demonstrated a reduction in profitability and efficiency metrics. Both net profit margin and ROE declined significantly, implying challenges in sustaining earnings quality and shareholder value. The asset turnover decrease indicates less efficient asset utilization over time. Meanwhile, moderate reductions in financial leverage suggest a cautious adjustment to the capital structure, possibly to mitigate risk amid declining performance. Collectively, these trends point to a need for strategic focus on operational efficiency and profitability enhancement going forward.

Tax Burden

The tax burden ratio exhibited moderate fluctuations over the observed periods. Initially, it ranged between 0.67 and 0.78, reaching a peak of 0.9 during the fiscal year 2019. Post-2019, there was a general decline, settling around the mid- to high-0.70s, with a slight resurgence to 0.86 before decreasing again.

Interest Burden

Interest burden remained remarkably stable throughout the periods, consistently hovering between 0.93 and 0.97. This indicates relatively stable interest expenses relative to earnings before interest and taxes, suggesting consistent debt servicing costs over time.

EBIT Margin

The EBIT margin showed a notable downward trend. Starting from a high of approximately 42.58% in early 2017, it decreased substantially to ranges between 23.98% and 33.36% in later quarters. The largest decline was observed between early 2017 and 2018, after which the margin stabilized somewhat but remained below earlier levels.

Asset Turnover

Asset turnover demonstrated a gradual decline over the periods. Beginning around 0.53, it decreased steadily to a low of 0.28 by the end of the data series. This reduction reflects decreasing efficiency in generating revenue from assets, particularly notable in the latter quarters.

Financial Leverage

Financial leverage fluctuated within a narrow range, from approximately 1.42 to 1.93. The highest leverage periods occurred around late 2017 and 2018, with a gradual decline towards the most recent periods, indicating a trend towards reduced reliance on debt or increased equity financing.

Return on Equity (ROE)

ROE exhibited a clear declining pattern. It started at around 29% in early 2017 but consistently decreased over time to a low of 8.55% by late 2021. This decline reflects the combined impacts of lower operating margins, diminishing asset utilization, and changes in financial leverage, culminating in reduced profitability for shareholders.

Net Profit Margin

The net profit margin exhibited a general decline over the analyzed periods, beginning at approximately 30.5% in early 2017 and decreasing to around 21.2% by late 2021. There were fluctuations along the way, with notable decreases occurring from early 2017 to early 2018, a partial recovery toward the end of 2018 and 2019, followed by a renewed downward trend in 2020 and some volatility thereafter. Despite these fluctuations, the margin remained below the initial levels throughout the latter part of the timeline, indicating compression on profitability relative to revenue.

Asset Turnover

The asset turnover ratio showed a decreasing trend across the periods under review, starting near 0.53 in 2017 and dropping to as low as 0.28 by late 2021. The ratio was relatively stable in the first two years with minor variation around 0.5, but beginning in 2019, a more consistent decline became evident. This suggests a reduction in the efficiency with which the company utilized its assets to generate sales, particularly in the most recent periods.

Return on Assets (ROA)

Return on assets similarly declined during the timeframe, moving from a high of about 16.1% in early 2017 to just over 6% by late 2021. The downward trend was consistent with the declines observed in net profit margin and asset turnover, reflecting reduced overall profitability from the company’s asset base. The ROA experienced a gradual decrease through 2018 and 2019, followed by a steeper decline into 2020 and 2021, indicating challenges in maintaining asset profitability in more recent periods.

Overall Analysis

The combined trends in net profit margin, asset turnover, and ROA imply a weakening financial performance over the evaluated quarters. Reduced profitability margins, coupled with declining efficiency in asset utilization, culminated in a significant drop in return on assets. This may reflect increased costs, pricing pressures, or strategic investments that have not yet translated into proportional revenue gains. The data suggests an area of concern around operational efficiency and profitability sustainability that warrants further investigation.

Tax Burden

The tax burden ratio exhibits variability over the observed periods, generally fluctuating between approximately 0.67 and 0.90. Notably, there was a peak around late 2018 and early 2019, reaching levels close to 0.90, followed by a decline to the mid to high 0.70s range in 2020 and 2021. This indicates some variability in effective tax rate management or changes in taxable income or tax strategies across the quarters.

Interest Burden

The interest burden ratio remains relatively stable and consistently high over the periods, mostly between 0.93 and 0.97. This stability suggests a relatively steady cost of debt and minimal fluctuations in interest expenses relative to earnings before interest and taxes (EBIT), reflecting consistent financial leverage and effective interest management.

EBIT Margin

The EBIT margin shows a declining trend over the timeframe. Initially, margins were strong, exceeding 40% in early 2017, but a significant drop occurred in 2018 where margins decreased to around 30%. Subsequently, margins fluctuated in the mid to high 20% range through 2020 and 2021, with the lowest observed values around 24%. This trend indicates pressure on operating profitability, possibly due to higher operating costs, increased competition, or other factors impacting earnings before interest and tax.

Asset Turnover

Asset turnover ratios generally show a downward trend, starting around 0.53 in early 2017 and decreasing to as low as 0.28 by late 2021. This decline suggests decreasing efficiency in utilizing assets to generate sales or revenues, potentially indicating investment in assets not immediately translating into proportional sales growth or overall lower demand.

Return on Assets (ROA)

Return on assets declines markedly throughout the observed periods. ROA started at a high point above 16% in early 2017 and steadily declined, reaching approximately 6% by late 2021. This decline reflects a combination of reduced profitability and asset utilization efficiency, signaling overall diminishing returns generated from the company’s asset base.

The analysis of the quarterly financial ratios reveals several important trends in the company's profitability and burden measures over the observed periods.

Tax Burden

The tax burden ratio exhibited moderate fluctuations over time. Initially, it ranged between 0.74 and 0.78 through 2017, indicating a stable tax impact on earnings. There was a notable increase during late 2018 and early 2019, peaking near 0.9, suggesting a higher proportion of earnings retained after taxes during that time. Following this peak, the ratio showed a downward trend into 2020, falling to around 0.77 - 0.79, before a slight increase in mid-2021. Overall, this suggests periodic variability in tax efficiency but a general capacity to retain a substantial portion of pre-tax earnings after taxes.

Interest Burden

The interest burden ratio remained consistently high, close to 0.94 - 0.97 throughout the period, indicating minimal impact from interest expenses on earnings before taxes. A slight gradual decrease is observed towards 2021, approaching 0.93 - 0.94, but the overall burden from interest payments has been minor and stable.

EBIT Margin

The EBIT margin experienced a marked decline over the timeframe analyzed. Starting around 42.58% in early 2017, there was a significant drop in 2018 to roughly 28-31%, which remained fairly stable through early 2019. A further gradual decline occurred in 2020 and into 2021, where the margin decreased to a low in the 23.98% to 27.08% range. This downward trend points to reduced earnings before interest and taxes relative to revenue, reflecting possible margin compression due to increased costs, pricing pressures, or other operational challenges.

Net Profit Margin

The net profit margin followed a parallel downward trajectory with some variability. Initially high around 30.5% in 2017, it dropped sharply to the 19-25% range during 2018 and 2019. There was a slight recovery in some quarters but overall, the margin declined further in 2020 down to levels near 19-20%, and it remained below historical highs into late 2021, fluctuating between approximately 18-21%. This decline suggests diminishing profitability from core operations after all expenses and taxes, which could implicate increased costs or declining revenue growth.

Collectively, the data illustrate a company experiencing consistent operational and profitability pressures over the years analyzed. Despite stable interest expenses, the operating and net margins have contracted steadily, and tax burden ratios have varied without a clear improving trend. These developments indicate potential challenges in cost control, efficiency, or competitive market conditions impacting overall financial performance.