Lam Research Corp. (NASDAQ:LRCX)

The financial data reveals several notable trends over the six-year period from 2019 to 2024. Net operating profit after taxes (NOPAT) experienced significant growth from 2019 through 2022, peaking in 2022. However, a decline is observed subsequently in 2023 and continues into 2024, indicating a reduction in operating profitability in the most recent years compared to the earlier period.

The cost of capital steadily increased from 17.4% in 2019 to 19.46% in 2024. This gradual rise suggests increasing expenses associated with financing and capital deployment, possibly reflecting higher risk or changes in market conditions affecting the company’s capital structure or external financing costs.

Invested capital shows a consistent upward trend from 2019 to 2023, indicating expansion or reinvestment in the company’s asset base. The peak occurs in 2023 at approximately US$14.99 billion, followed by a slight decrease in 2024. This reduction might reflect divestitures, asset sales, or completion of investment cycles.

Economic profit, which accounts for the cost of capital, shifts from a negative value in 2019 to positive values from 2020 onwards, reaching its highest level in 2022. This measure reflects the value created beyond the cost of capital. However, similar to NOPAT, economic profit declines substantially in 2023 and 2024, signaling a decrease in value generation relative to the capital invested and its cost during the last two years.

Summary of Key Trends

Profitability:

Strong growth in operating profit until 2022 followed by a notable decline in the subsequent years.

Cost of Capital:

A steady increase over the entire period, which may contribute to reduced economic profitability.

Invested Capital:

Generally increasing, reflecting ongoing investments with a slight contraction noted in the latest year.

Economic Profit:

Improved significantly from 2019 to 2022, suggesting increased value creation, but experienced a sharp drop in 2023 and 2024 despite high levels of invested capital.

The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) of the company over the six-year period.

Net Income

Net income shows an overall increasing trend from 2019 through 2022, rising from approximately 2.19 billion USD to a peak of about 4.61 billion USD in 2022. However, after this peak, net income experienced a downward movement for the next two years, decreasing to roughly 3.83 billion USD by 2024. Despite this decline, the 2024 figure remains significantly higher than the 2019 value, indicating sustained profitability above earlier levels.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a somewhat different trajectory compared to net income. Starting at around 1.6 billion USD in 2019, it increased markedly to 5.63 billion USD in 2022, reflecting strong operational performance. Unlike net income, however, NOPAT shows a more pronounced decline after 2022, dropping to approximately 3.26 billion USD in 2024. This decrease suggests some erosion in core operating profitability, possibly linked to operational challenges or rising costs impacting after-tax profits from operations.

In summary, while both net income and NOPAT demonstrated robust growth up to fiscal year 2022, both metrics have since declined through 2024. The sharper decrease in NOPAT relative to net income may indicate operational pressures or changes in taxation and expense structures affecting core profitability. Nevertheless, the financial outcomes in 2024 remain elevated compared to the starting period in 2019, signifying continued overall financial strength despite recent downtrends.

The analysis of the provided financial data over the six-year period reveals the following trends in the tax-related items:

Provision for income taxes (US$ in thousands)

This item shows a general upward trend from 2019 to 2023, increasing from approximately 255 million in 2019 to a peak of around 598 million in 2023. The most significant increases occur between 2019 and 2021, and from 2021 to 2022. However, in 2024, there is a noticeable decline to about 532 million, indicating a reduction in the provision for income taxes despite the prior years' increases.

Cash operating taxes (US$ in thousands)

Cash operating taxes demonstrate a more volatile pattern. From 2019 to 2022, there is a consistent and substantial rise, with values increasing from about 266 million in 2019 to a high of approximately 883 million in 2022. This represents more than a threefold increase over the four years. Subsequently, in 2023 and 2024, cash operating taxes decrease to around 782 million and 718 million, respectively. Although these later figures remain significantly above the 2019 level, the decline from the peak suggests a recent reduction in cash tax payments.

Comparatively, both provisions for income taxes and cash operating taxes follow a similar upward trajectory initially, with peaks occurring in the most recent years before declining in 2024. The cash operating taxes exhibit greater volatility with proportionally larger swings, which may reflect fluctuations in taxable income or tax planning activities. The decrease in both measures in 2024 could be indicative of changes in profitability, tax rates, or tax planning strategies resulting in lower tax liabilities or cash outflows despite previous growth trends.

Total reported debt & leases

The total reported debt and leases increased noticeably from 4,564,944 thousand US dollars in mid-2019 to 5,984,094 thousand US dollars by mid-2020, indicating a significant rise in liabilities within that year. Subsequently, this figure declined to approximately 5,165,377 thousand US dollars in mid-2021 and remained relatively stable around the 5.2 million thousand US dollar mark through mid-2024, suggesting a stabilization in the company's debt levels after the initial increase.

Stockholders’ equity

Stockholders' equity exhibited a consistent upward trend over the entire period, starting at 4,673,865 thousand US dollars in mid-2019 and rising steadily to 8,539,454 thousand US dollars by mid-2024. This increase reflects a strengthening of the company’s net assets and indicates ongoing growth and accumulation of value attributable to shareholders.

Invested capital

Invested capital showed a general increasing trend from 9,801,641 thousand US dollars in mid-2019 to a peak of approximately 14,985,787 thousand US dollars in mid-2023. However, there was a slight decrease in mid-2024 to 14,840,667 thousand US dollars. This pattern suggests continued investment into operational assets over the years with a minor reduction or adjustment in the most recent period.

Economic Profit

The economic profit showed significant volatility over the observed period. It started with a negative value of -107,233 thousand US dollars in 2019, indicating a loss. This figure turned positive in 2020 and increased sharply, reaching a peak of approximately 3,067,751 thousand US dollars in 2022. Following this peak, economic profit demonstrated a downward trend, decreasing to 1,167,611 thousand US dollars in 2023 and further declining to 367,985 thousand US dollars in 2024. This suggests fluctuating profitability, with substantial gains in the middle years but a reduction in more recent periods.

Invested Capital

Invested capital consistently increased from 9,801,641 thousand US dollars in 2019 to a peak of 14,985,787 thousand US dollars in 2023. However, in 2024, there was a slight decrease to 14,840,667 thousand US dollars. This overall upward trend indicates ongoing investment or asset accumulation over the years, with a potential early indication of stabilization or slight divestment in the most recent year.

Economic Spread Ratio

The economic spread ratio moved from negative in 2019 (-1.09%) to positive and significantly higher values in subsequent years, reaching its highest point at 22.7% in 2022. After that peak, the ratio declined sharply to 7.79% in 2023 and further down to 2.48% in 2024. This pattern reflects an improvement in the returns relative to the cost of capital until 2022, followed by a notable reduction in economic profitability over the last two years.

Adjusted Revenue

The adjusted revenue demonstrated a clear upward trend from June 30, 2019, through June 26, 2022, increasing from approximately $9.1 billion to about $18.3 billion. This represents a substantial growth over the three-year period. However, starting from June 25, 2023, the revenue declined to approximately $17.1 billion and further decreased to around $14.6 billion by June 30, 2024, indicating a reversal of the prior growth trend in the most recent years.

Economic Profit

The economic profit showed a significant improvement from a negative value of approximately -$107.2 million in 2019 to a positive peak exceeding $3 billion in 2022. After this peak, the economic profit declined notably, dropping to about $1.17 billion in 2023 and further down to approximately $368 million in 2024. Despite remaining positive after 2019, the sharp decrease post-2022 suggests reduced profitability or increased costs.

Economic Profit Margin

The economic profit margin displays a similar pattern to the economic profit. Starting from a negative margin of -1.18% in 2019, it improved progressively to a peak of 16.76% in 2022. Following this, the margin contracted considerably to 6.84% in 2023, and further down to 2.52% in 2024. This decline in margin indicates a reduction in the efficiency or profitability relative to revenue over the last two years.

Overall, the data indicates strong growth and profitability improvements from 2019 through 2022, followed by a notable downturn in both revenue and economic profit metrics from 2023 to 2024. The declines in adjusted revenue and economic profit margin in the latter years suggest challenges in maintaining earlier growth levels and profitability margins.