Illumina Inc. (NASDAQ:ILMN)

The analysis of the quarterly financial metrics reveals several noteworthy trends spanning from early 2016 to late 2021.

Return on Assets (ROA)

The ROA data commences in the fourth quarter of 2016, starting at 10.81%. There is a significant increase observed in 2017, peaking at 16.10% in the second quarter, followed by relatively stable values around 13% to 15% throughout 2017. During 2018 and 2019, ROA maintains a moderate range approximately between 10% and 13%, with minor fluctuations. From 2020 onwards, a steady decline is noticeable, dropping from around 13.7% in late 2019 to a low of 6.01% by the third quarter of 2021. This indicates deteriorating efficiency in asset utilization over time in the recent periods.

Financial Leverage

Financial leverage starts at approximately 1.91 in early 2016, with minor fluctuations between 1.77 and 1.95 up to late 2017. Thereafter, it shows a gradual downward trend, reaching a low of 1.42 by the last quarter of 2021. This gradual reduction in leverage suggests a conservative approach to funding, possibly decreasing reliance on debt relative to equity over the observed periods.

Return on Equity (ROE)

ROE data begins in the fourth quarter of 2016 at 21.06%, showing a strong upward trend through 2017, reaching a peak of 29.01% in the second quarter of that year. Following this peak, ROE stabilizes somewhat between 19% and 27% up to late 2019. However, from 2020 onward, there is a consistent decline, falling to 8.55% by the third quarter of 2021. This trend is indicative of weakening profitability from shareholders' perspective, corresponding somewhat with the declining ROA and financial leverage patterns in the same period.

Overall, the data highlights an initial period of strong profitability and asset efficiency through 2016 and 2017, followed by a gradual decline in performance from 2018 onwards. The reduced financial leverage over time may reflect a strategic shift in capital structure, possibly aimed at risk mitigation. However, the concurrent decline in both ROA and ROE during recent quarters suggests challenges in sustaining returns and effective asset utilization.

Net Profit Margin

The net profit margin exhibits a generally positive but fluctuating trend over the reported periods. Beginning at 19.29% in late 2016, it peaked around early 2017 at over 30%, followed by a gradual decline with intermittent recoveries. Notably, there was a decrease from approximately 28% in late 2019 to a low near 18% in early 2021, after which a modest improvement to around 21% is observed. This indicates variability in profitability efficiency over time, with some volatility in sustaining higher margins.

Asset Turnover

The asset turnover ratio demonstrates a slight downward trajectory throughout the periods. Starting at approximately 0.56 in late 2016, it remains relatively stable but gradually decreases, reaching near 0.28 by late 2021. The declining trend suggests a reduced effectiveness in generating sales from assets, particularly notable in the last observed quarter, which could reflect changes in asset utilization or sales volumes relevant to the company’s operational structure.

Financial Leverage

Financial leverage ratios remain relatively stable with minor fluctuations, generally oscillating between 1.4 and 1.9. Early periods show slightly higher leverage levels near 1.9, declining to around 1.42-1.60 during mid to late phases, before a moderate increase occurs in mid-2021. Overall, the leverage position appears moderately conservative with some efforts towards reducing reliance on debt or improving equity base at certain points in time.

Return on Equity (ROE)

ROE mirrors the trends seen in net profit margin, starting appreciably around 21.06% in late 2016 and increasing toward approximately 29% in early 2017. This performance declines steadily post-2018, falling markedly to about 8.55% by late 2021. The decreasing ROE signals a reduction in the company’s efficiency in generating returns on shareholder equity, potentially linked to lower profit margins and diminished asset turnover during the latest periods.

The financial data reveals several notable trends and dynamics over the examined periods. The figures related to profitability, efficiency, leverage, and burdens offer insights into operational performance and financial structure changes.

Tax Burden

The Tax Burden ratio shows some variability across the periods, with an initial increase from 0.67 in early 2018 to a peak of 0.90 by late 2019. Subsequently, the ratio slightly declines but remains relatively stable between 0.74 and 0.86 in more recent quarters. This suggests fluctuations in the effective tax rate impacting net profitability, with some periods benefiting from lower tax impacts.

Interest Burden

The Interest Burden ratio is relatively stable throughout the periods, consistently hovering close to 0.94 to 0.97. This stability indicates consistent management of interest expenses relative to earnings before interest and taxes, implying stable debt servicing costs and interest coverage over time.

EBIT Margin

The EBIT Margin exhibits notable fluctuations. Starting from a value of 26.22% in early 2017, it reaches a high of over 42% in mid-2016 and stabilizes around the 30% level for most of 2017 and 2018. A gradual decline is seen thereafter, reaching around 24% in late 2021, with some slight recovery towards the end. This reflects a period of strong operational profitability early on, followed by a general contraction in operating margin, highlighting either increased costs, pricing pressures, or changing revenue mix.

Asset Turnover

The Asset Turnover ratio reveals a generally declining trend. From around 0.56 in 2016 and 2017, it drops steadily to around 0.28 by late 2021. This indicates a decrease in the efficiency with which the company generates sales from its assets, possibly due to increased asset base or declining sales productivity relative to assets over time.

Financial Leverage

Financial Leverage remains relatively steady initially at just under 2.0 but shows a downward trend from early 2019 onward, decreasing to around 1.42 by late 2021. This decline indicates a reduction in the use of debt financing relative to equity, suggesting a more conservative capital structure or repayment of liabilities in recent periods.

Return on Equity (ROE)

The ROE follows a pattern somewhat consistent with other profitability metrics. It peaked near 29% in mid-2017, subsequently declined progressively to below 9% by late 2021, showing diminished overall profitability for shareholders. This decline is influenced by both lower EBIT margins and asset turnover, despite the reduced financial leverage, pointing to challenges in maintaining return levels on shareholder investments.

In summary, the data indicates that while the company maintained stable interest expense management and reduced leverage over time, it faced growing challenges in operational efficiency and profitability. The declining asset turnover and EBIT margin contributed to a significant reduction in ROE, highlighting potential areas for strategic focus such as enhancing asset utilization and controlling operating expenses to restore profitability levels.

The financial ratios over the analyzed periods reveal distinct trends in profitability, efficiency in asset use, and overall returns on assets.

Net Profit Margin (%)

The net profit margin displayed a significant rise starting from April 2017, reaching a peak of approximately 30% in the third and fourth quarters of 2017. Following this peak, the margin declined steadily through 2018, leveling around the mid-20% range by the end of that year. During 2019 and early 2020, the margin remained relatively stable, fluctuating between 25% and 28%. However, from the second quarter of 2020 onwards, the net profit margin showed a consistent declining trend, falling below 20% by mid-2021 before a slight recovery was observed in the final quarter reviewed.

Asset Turnover (ratio)

Asset turnover began at a moderate level near 0.56 in early 2017 but exhibited a declining trend throughout the period analyzed. Despite some minor fluctuations, the overall movement was downward, reaching as low as 0.28 by the third quarter of 2021. This decline suggests a decrease in the efficiency with which the company utilized its assets to generate sales over time.

Return on Assets (ROA) (%)

Return on assets followed a pattern somewhat aligned with net profit margin trends. Starting at around 10.8% in early 2017, ROA increased notably to exceed 16% in mid-2017 before gradually decreasing through 2018 and stabilizing around 11%-13% through 2019 into early 2020. From mid-2020 onwards, ROA experienced a pronounced fall, dropping below 7% by the latest periods, indicating a reduction in the overall profitability generated per unit of assets during this later phase.

In summary, the company exhibited strong profitability in mid-2017, with peak net profit margins and return on assets coinciding with relative efficiency in asset utilization. However, subsequent periods experienced declines in both asset turnover and profitability ratios, pointing to challenges in maintaining operational efficiency and generating returns on invested assets in the more recent years covered by the data. The downward trends from mid-2020 suggest a period of pressured financial performance, which may warrant further investigation into underlying operational or market factors impacting the company.

The analysis of the financial ratios over multiple quarters reveals distinct trends and variations that provide insights into operational efficiency, profitability, and financial burden.

Tax Burden

The tax burden ratio, available from December 2016 onward, initially fluctuates between 0.67 and 0.9. A notable upward trend occurs during 2018 and 2019, peaking near 0.9 in several quarters, indicating a relatively high portion of earnings retained after taxes in those periods. However, from mid-2019 through 2021, this ratio shows a declining pattern, falling to as low as 0.74 before a slight recovery to approximately 0.83, suggesting increased tax impact or changes in tax strategy during the later periods.

Interest Burden

The interest burden remains relatively stable throughout the observed period, hovering close to 0.95 to 0.97 in earlier years and slightly decreasing to the range of 0.93 to 0.94 toward the later quarters. This indicates consistent management of interest expense relative to earnings before interest and taxes with minimal fluctuations.

EBIT Margin

The EBIT margin shows significant variability. Starting with moderately low values around 26% in early data points, it peaks above 42.5% in the mid-2016 to early 2017 timeframe. Following this peak, the margin generally declines to a range between 23.98% and 33.36% in subsequent quarters. The downward trend in recent quarters to values near 24% to 27% points to a potential reduction in operational profitability or increased costs impacting earnings before interest and taxes.

Asset Turnover

The asset turnover ratio reveals a gradual decrease over time. From a level around 0.56 in late 2016, the ratio steadily declines to as low as 0.28 by the third quarter of 2021. This trend indicates a declining efficiency in using assets to generate revenue, suggesting a possible increase in asset base not accompanied by proportional sales growth, or a decline in sales output relative to assets employed.

Return on Assets (ROA)

The return on assets follows a pattern largely consistent with changes in EBIT margin and asset turnover, reflecting profitability in relation to asset usage. Initially, ROA rises to a peak of approximately 16.1% in mid-2016, followed by fluctuations and a general downward trend to levels near 6.01% in late 2021. This decrease in ROA signifies either declining net income or decreasing asset productivity—or a combination of both—pointing to potential challenges in maintaining efficient returns on invested assets.

Overall, the data presents a picture of stable interest expense management but reveals downward pressure on profitability and asset utilization efficiency from the peak period in 2016-2017 toward 2021. The decreasing trends in EBIT margin, asset turnover, and ROA may warrant further investigation into operational strategies, cost control measures, and asset management to enhance future performance.

Tax Burden

The tax burden ratio displays fluctuations over the periods analyzed, starting around 0.78 in early 2017, then showing a general increase reaching a peak near 0.90 in early 2019. Subsequently, a downward trend is apparent, with values declining to approximately 0.74 by mid-2021. This indicates variability in the proportion of earnings retained after tax obligations, with some periods demonstrating improved tax efficiency and others less so.

Interest Burden

The interest burden ratio remains relatively stable throughout the period, consistently near 0.94 to 0.97. Minor dips and rises occur, but no significant volatility is observed. The consistently high ratios indicate that interest expenses have a limited impact on earnings before tax, suggesting a manageable level of debt-related charges relative to operating income.

EBIT Margin

The EBIT margin experiences noticeable variation, with an initial increase from around 26% in early 2017 to a peak exceeding 42% in mid-2016. Following this peak, the margin declines to a range between 23% and 33% over subsequent quarters. These fluctuations suggest periods of changing operating efficiency and cost management effectiveness. The margin's decline in later years may reflect increasing operational costs or pricing pressures.

Net Profit Margin

The net profit margin mirrors some trends seen in the EBIT margin but with greater variability. After reaching highs above 30% in mid to late 2016, the margin declines to around 18-21% in the most recent periods. The pattern suggests that while operating profitability remained relatively strong during some quarters, the ultimate earnings attributable to shareholders after all expenses, including taxes and interest, experienced downward pressure. This could be indicative of increased costs, tax changes, or other financial impacts diminishing net profitability.