Micron Technology Inc. (NASDAQ:MU)

Net Operating Profit After Taxes (NOPAT)

The NOPAT experienced a significant decline from 6,650 million US dollars in 2019 to a low of 2,891 million in 2020. This was followed by a recovery period reaching 9,071 million in 2022. However, 2023 saw a substantial negative NOPAT of -5,885 million, indicating an operational loss. The most recent data from 2024 shows a partial recovery to 857 million, although this remains well below the earlier peak levels.

Cost of Capital

The cost of capital remained relatively stable over the period, fluctuating narrowly between 16.73% and 17.45%. This stability suggests consistent expectations of risk and return demanded by capital providers, despite variations in other financial metrics.

Invested Capital

Invested capital showed a steady increase from 38,774 million US dollars in 2019 to a peak of 53,467 million in 2023, followed by a slight decrease to 53,327 million in 2024. This upward trend reflects ongoing investments or asset growth, which continued despite volatility in operational profitability.

Economic Profit

Economic profit started marginally positive at 33 million in 2019 but turned significantly negative in subsequent years. The decline was steep in 2020 and 2023, with values of -4,269 million and -14,831 million respectively. By 2024, economic profit remained negative at -8,371 million. The pattern indicates that the company consistently failed to generate returns above its cost of capital during most of the period, reflecting value destruction despite variations in invested capital and NOPAT.

Net Income (Loss) Attributable to Micron

The net income attributable to the company displayed considerable volatility over the six-year period. Starting at $6,313 million in 2019, it declined sharply to $2,687 million in 2020. This was followed by a recovery in 2021, reaching $5,861 million, and a further increase to $8,687 million in 2022, marking the peak in the observed timeframe. However, this positive trend did not persist, as the net income turned negative in 2023 with a loss of $5,833 million. In 2024, the company managed to return to profitability with a net income of $778 million, albeit significantly lower than the previous highs.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures closely mirrored the trends observed in net income, indicating a strong correlation between operating profitability and net results. The value started at $6,650 million in 2019, dropped to $2,891 million in 2020, then increased in 2021 and 2022 to $5,967 million and $9,071 million, respectively. The peak in 2022 was followed by a significant decline in 2023 to a negative NOPAT of $5,885 million. In 2024, there was a slight recovery to a positive NOPAT of $857 million, yet this remains a fraction of the 2022 peak.

General Observations

The financial data reveal a pattern of cyclical fluctuations with a notable peak in 2022 across key profitability metrics. The sharp reversals to negative values in 2023 suggest the occurrence of adverse events or operational challenges during that year. Although partial recovery is evident in 2024, profitability has not returned to prior peak levels. These variations underscore the company's exposure to volatile operating conditions affecting its financial performance.

Income Tax Provision

The income tax provision exhibits a fluctuating pattern over the analyzed periods. Initially, it significantly decreased from 693 million US dollars in August 2019 to 280 million in September 2020. This was followed by a moderate increase to 394 million in September 2021 and a substantial rise to 888 million in September 2022. Subsequently, there was a notable decline to 177 million in August 2023, with a subsequent increase to 451 million by August 2024. This variability may suggest changes in profitability, tax rates, or adjustments related to deferred tax assets or liabilities.

Cash Operating Taxes

The cash operating taxes demonstrated a similar but not identical trend to the income tax provision. It decreased from 345 million US dollars in August 2019 to 189 million in September 2020. A pronounced increase followed, with cash operating taxes rising to 446 million in September 2021 and further to 618 million in September 2022. Thereafter, there was a steep decline to 172 million in August 2023, followed by an increase to 428 million in August 2024. The alignment of cash operating taxes with the income tax provision suggests consistency in tax-related cash outflows, although the variations indicate potential timing differences or changes in tax payments relative to the tax provision.

The financial data over the six-year period demonstrates several notable trends in the company’s capital structure and financing strategy.

Total reported debt & leases

The total reported debt and leases have generally increased from 6,415 million USD in 2019 to 14,078 million USD in 2024. This represents more than a doubling of debt levels over the period. A modest rise is observed annually until 2022, followed by a substantial jump between 2022 and 2023, indicating potential increased leverage or investment activities financed through debt.

Total Micron shareholders’ equity

Shareholders’ equity shows a steady upward trend from 35,881 million USD in 2019 to a peak of 49,907 million USD in 2022. However, a decline occurs in 2023 down to 44,120 million USD, after which equity slightly recovers to 45,131 million USD in 2024. This fluctuation suggests possible changes in retained earnings or other comprehensive income and potentially some equity adjustments during 2023.

Invested capital

Invested capital consistently increased from 38,774 million USD in 2019 to 53,327 million USD in 2024. The growth is relatively steady with a notable acceleration from 2020 to 2022, followed by a plateau and slight decrease in the last year. This trend signifies continued investment in fixed and working capital assets, maintaining a high level of capital employed in the business despite recent minor declines.

Overall, the data reveals a financial strategy focused on expanding capital investment and taking on more debt, especially after 2022, with equity levels reflecting some volatility. The rise in debt outpaces the growth of equity in the latest periods, indicating increased leverage. The relatively stable invested capital suggests sustained operational scale with potential recalibration in capital structure.

Economic Profit

The economic profit demonstrates significant volatility over the observed periods. Initially, there was a modest positive profit of 33 million US dollars in 2019. However, this figure sharply declined to a substantial negative value of -4,269 million US dollars in 2020. Although the loss lessened somewhat in 2021 to -2,121 million US dollars and further to -3 million US dollars in 2022, the economic profit deteriorated markedly in 2023, reaching -14,831 million US dollars, before improving slightly but still remaining deeply negative at -8,371 million US dollars in 2024.

Invested Capital

Invested capital displayed a steady upward trend from 38,774 million US dollars in 2019 to 53,327 million US dollars in 2024. The growth occurred progressively each year, with notable increments particularly between 2020 and 2022, leveling off somewhat thereafter but maintaining a high investment level through 2024.

Economic Spread Ratio

The economic spread ratio followed a pattern consistent with the economic profit trends, beginning at a marginal positive value of 0.09% in 2019. It then plunged to a deeply negative -10.09% in 2020, with improvement to -4.58% in 2021 and -0.01% in 2022. However, this ratio experienced a pronounced deterioration in 2023 to -27.74%, and while there was partial recovery in 2024 to -15.7%, it remained significantly negative throughout this period.

Summary of Trends and Insights

The analysis reveals a company facing substantial economic challenges across the evaluated period. Despite increasing levels of invested capital, which suggests ongoing investment and expansion efforts, profitability as measured by economic profit and economic spread ratio deteriorated markedly starting in 2020. The losses reached extreme levels in 2023, indicating that investments did not translate into positive economic returns. The partial recoveries in 2024, while notable, did not restore profitability to earlier positive levels. This pattern may imply inefficiencies, high costs, or adverse market conditions impacting the company’s economic returns despite increasing capital deployment.

Revenue Trend

Revenue exhibited fluctuations over the six-year period. It initially decreased from 23,406 million US$ in August 2019 to 21,435 million US$ in September 2020. This was followed by a steady increase reaching a peak of 30,758 million US$ in September 2022. However, the subsequent period showed a significant drop to 15,540 million US$ in August 2023, before rebounding to 25,111 million US$ in August 2024.

Economic Profit Pattern

Economic profit showed a marked deterioration over the timeframe. It started positive at 33 million US$ in August 2019 but quickly moved into negative territory, registering -4,269 million US$ in September 2020. Although there was some recovery the following year to -2,121 million US$, the value remained negative and approached zero by September 2022. Then it significantly worsened to -14,831 million US$ in August 2023, slightly improving to -8,371 million US$ in August 2024, but still far below positive levels.

Economic Profit Margin Analysis

The economic profit margin mirrored the economic profit trend with an initial positive margin of 0.14% in August 2019 rapidly shifting to a deep negative margin of -19.92% by September 2020. Following a partial recovery to -7.66% in 2021 and near zero at -0.01% in 2022, it deteriorated sharply to -95.44% in August 2023. By August 2024, the margin improved to -33.34%, indicating some recovery but remaining substantially negative.

Overall Insights

The data reflects a challenging financial performance characterized by substantial negative economic profit and margin values despite fluctuations in revenue. The company experienced a peak in revenue in 2022 followed by a sharp decline in 2023, which corresponded with the most severe negative economic profit results. Though revenue rebounded in 2024, economic profitability remained significantly negative, suggesting issues with cost management or other profitability factors that continued to impact economic value generation adversely.