Lam Research Corp. (NASDAQ:LRCX)

Net Operating Profit After Taxes (NOPAT)

The NOPAT showed a significant upward trend from 2019 to 2022, increasing from approximately 1.6 billion to over 5.6 billion US dollars. This represents a substantial growth in operating profitability. However, from 2022 onward, there is a noticeable decline, with NOPAT decreasing to around 4.1 billion in 2023 and further dropping to about 3.3 billion in 2024. This suggests a reduction in operating earnings after taxes in the most recent two periods.

Invested Capital

Invested capital consistently increased over the entire period, growing from approximately 9.8 billion US dollars in 2019 to a peak of nearly 15 billion in 2023. In 2024, a slight decrease is observed, with the invested capital falling marginally to about 14.8 billion. Overall, the data shows steady expansion in the capital invested in the business, with a minor reversal in the latest year.

Return on Invested Capital (ROIC)

ROIC displayed a strong improving trend from 2019 to 2022, rising from 16.31% to a peak of 41.68%. This indicates increasing efficiency in generating returns from invested capital over these years. Following this peak, ROIC experienced a sharp decline to 27.1% in 2023 and further to 21.94% in 2024. Despite the decline, the ROIC in 2024 remains above the initial 2019 level, which may reflect an overall improved capital utilization relative to the earliest period.

Summary of Trends and Insights

The company's operating profitability and return on invested capital improved markedly from 2019 through 2022, accompanied by a consistent increase in invested capital. After reaching record highs in 2022, both profitability and ROIC have declined notably in the subsequent two years, suggesting possible challenges impacting operational efficiency or market conditions. Despite the recent downturn, invested capital has remained relatively stable, indicating sustained commitment to assets and operations. These patterns may imply the need for closer examination of factors influencing the reduced profitability and efficiency post-2022 to inform strategic decision-making.

The financial data reveals several significant trends in the company's operational efficiency, capital utilization, tax management, and overall returns over the six-year period from mid-2019 to mid-2024.

Operating Profit Margin (OPM)

The operating profit margin increased steadily from 20.46% in 2019 to a peak of 35.59% in 2022, indicating improved profitability and operational efficiency during this period. However, from 2022 to 2024, the margin declined to 27.18%, suggesting a reduction in profitability, though it remained higher than the initial 2019 level.

Turnover of Capital (TO)

Capital turnover showed fluctuation over the years. It started at 0.93 in 2019 and dropped slightly in 2020 to 0.86. It then surged to 1.35 in 2022, reflecting more efficient utilization of capital to generate revenue. After this peak, turnover decreased again to 0.99 by 2024, nearing the original 2019 level.

1 – Effective Cash Tax Rate (CTR)

This ratio remained fairly stable at high levels above 80% throughout the period. It showed a gradual decline from 85.74% in 2019 to 81.93% in 2024, indicating a modest reduction in cash tax burdens or potential improvements in tax planning and expense management over time.

Return on Invested Capital (ROIC)

The return on invested capital experienced a marked increase from 16.31% in 2019 to a peak of 41.68% in 2022, reflecting enhanced profitability and efficient use of invested funds during these years. However, the ROIC declined notably to 21.94% by 2024, aligning more closely with the levels observed in the earlier years but still remaining elevated compared to the starting point.

Overall, the data indicates the company achieved significant improvements in profitability and returns on capital through 2022, accompanied by increased operational efficiency. Post-2022, there is a clear retreat in both profitability and capital turnover metrics, signaling potential challenges or shifts in market conditions. The effective cash tax rate trend suggests a gradual improvement in tax efficiency, albeit within a relatively narrow range.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT shows a rising trend from 2019 to 2022, increasing substantially from approximately 1.86 billion to 6.51 billion US dollars. This peak is followed by a decline in 2023 and 2024, with values reducing to around 4.84 billion and 3.97 billion respectively. Despite this recent downturn, the overall trend in the observed period is growth until 2022.

Adjusted Revenue

Adjusted revenue has increased steadily from 9.11 billion US dollars in 2019 to a high of approximately 18.31 billion in 2022. After this peak, revenue decreased to 17.07 billion in 2023 and further to 14.62 billion in 2024. Similar to NOPBT, revenue exhibits strong growth through 2022, followed by a decline in the subsequent two years.

Operating Profit Margin (OPM)

The operating profit margin improved consistently from 20.46% in 2019 to a peak of 35.59% in 2022. After the peak, the margin declined to 28.38% in 2023 and further to 27.18% in 2024. This indicates that profitability relative to revenue increased significantly over the initial years, but experienced a notable contraction following 2022.

Overall Trends and Insights

From 2019 to 2022, the company exhibited strong financial performance characterized by substantial growth in revenue and net operating profit, alongside improving profit margins. The peak in all these metrics in 2022 suggests a period of maximal operational efficiency and profitability. However, the subsequent years (2023 and 2024) reveal a decline in both revenue and profitability metrics, indicating challenges in maintaining the previously achieved growth and margins. This reversal may point to adverse market conditions, increased costs, or other operational challenges impacting financial performance.

Revenue Trends

The company's adjusted revenue experienced a general upward trajectory from 2019 to 2022, increasing from approximately $9.11 billion in 2019 to a peak of about $18.31 billion in 2022. However, a decline followed in the subsequent years, with revenue falling to around $17.07 billion in 2023 and further down to approximately $14.62 billion by mid-2024. This pattern indicates significant growth until 2022, after which a notable reduction occurred over the next two years.

Invested Capital Trends

Invested capital showed a steady increase throughout the observed period, rising from roughly $9.80 billion in 2019 to about $14.88 billion in 2023, with a slight decrease to approximately $14.84 billion by mid-2024. The growth in invested capital generally aligns with the expanding business scale, although it appears to plateau towards the end of the period.

Turnover of Capital (TO) Trends

The turnover of capital ratio initially declined from 0.93 in 2019 to 0.86 in 2020, reflecting decreased efficiency in utilizing capital in that interval. A marked improvement followed in 2021 and 2022, with the ratio increasing to 1.24 and then to 1.35, respectively, indicating enhanced capital utilization efficiency during these years. Subsequently, the ratio decreased again to 1.14 in 2023 and further to 0.99 by mid-2024, suggesting a reduction in efficiency trends similar to the revenue decline observed in the same period.

Overall Insights

The data reveal a period of strong growth and operational efficiency improvement until 2022, as evident from rising revenues and capital turnover. Despite continued capital investments, the declining revenue and capital turnover in the last two years may indicate challenges in maintaining previous growth rates and efficiency. This pattern could reflect external market conditions, internal operational factors, or a combination thereof, warranting further investigation into the underlying causes.

Cash Operating Taxes

The cash operating taxes have exhibited a generally upward trend from June 30, 2019, to June 26, 2022, increasing from 265,817 thousand US dollars to a peak of 882,564 thousand US dollars. However, in the subsequent years, there is a decline observed with the figure decreasing to 782,173 thousand US dollars as of June 25, 2023, and further to 717,911 thousand US dollars by June 30, 2024.

Net Operating Profit Before Taxes (NOPBT)

The NOPBT has demonstrated substantial growth from 1,864,124 thousand US dollars in June 2019, reaching its highest point at 6,514,868 thousand US dollars in June 2022. After this peak, the company experienced a decline in operating profit, falling to 4,843,743 thousand US dollars by June 2023, and continuing downwards to 3,973,916 thousand US dollars in June 2024.

Effective Cash Tax Rate (CTR)

The effective cash tax rate showed a declining trend from 14.26% in June 2019 to a low of 12.57% in June 2021. After that, it reversed course and rose steadily to 16.15% in June 2023, eventually reaching the highest value in the examined period of 18.07% by June 2024.

Overall Insights

The data reveals a pattern where net operating profit expanded significantly until mid-2022, followed by a marked decrease over the next two years. Correspondingly, cash operating taxes increased alongside profits up to 2022 but decreased thereafter as profits declined. The effective cash tax rate dropped during the initial years but then escalated substantially after 2021, suggesting possible changes in tax policies, tax planning strategies, or profitability characteristics influencing the tax burden relative to operating profits.