NXP Semiconductors N.V. (NASDAQ:NXPI)

The financial data over the five-year period indicates fluctuating profitability and efficiency in capital utilization. The net operating profit after taxes (NOPAT) started at 1,630 million US dollars in 2017 and increased significantly to 2,196 million US dollars in 2018. However, there was a sharp decline in 2019 and 2020, with NOPAT dropping to 303 million and 40 million US dollars respectively. In the most recent year, 2021, NOPAT rebounded strongly to 2,126 million US dollars, nearing the peak observed in 2018.

The cost of capital percentage remained relatively stable throughout the period, fluctuating mildly between 15.08% and 16.12%. This indicates the company’s capital costs did not experience drastic changes, maintaining a consistent benchmark for investment performance evaluation.

Invested capital gradually decreased from 20,519 million US dollars in 2017 to a low of 16,335 million US dollars in 2020, followed by a slight increase to 16,745 million US dollars in 2021. This trend suggests a strategic reduction in capital commitment during the middle years, potentially reflecting efforts to optimize asset efficiency or divest non-core assets.

Despite the increase in NOPAT in certain years, economic profit remained negative for all years under review, indicating that returns have not consistently exceeded the cost of capital. The economic profit improved from a substantial loss of -1,663 million US dollars in 2017 to a smaller loss of -519 million US dollars in 2018. However, it deteriorated significantly in 2019 and 2020, with losses of -2,304 million and -2,593 million US dollars respectively, before improving again to -473 million US dollars in 2021. This pattern reveals challenges in creating value above the capital cost during some years despite operational profitability improvements.

The financial data reveals notable fluctuations in both net income attributable to stockholders and net operating profit after taxes (NOPAT) over the five-year period.

Net Income Attributable to Stockholders

From 2017 to 2018, net income remained relatively stable, showing a slight decline from 2215 million US dollars to 2208 million US dollars. In 2019, a significant drop occurred, with net income decreasing sharply to 243 million US dollars. This downward trend continued into 2020, reaching a low of 52 million US dollars. However, in 2021, there was a strong recovery, with net income rising substantially to 1871 million US dollars, approaching earlier peak levels.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a somewhat parallel trend to net income. It increased from 1630 million US dollars in 2017 to 2196 million US dollars in 2018. In 2019, NOPAT declined considerably to 303 million US dollars and further dropped to 40 million US dollars in 2020, highlighting a period of operational challenges. A notable rebound occurred in 2021, with NOPAT climbing to 2126 million US dollars, indicating significant operational improvement.

Overall, the data indicates a period of stability in the initial years, followed by a marked deterioration in financial performance in 2019 and 2020. The pronounced recovery in 2021 for both net income and NOPAT suggests a recovery phase, possibly driven by operational enhancements or favorable market conditions. The volatility observed could be indicative of external disruptions or internal restructuring efforts during the observed timeframe.

The financial data for income tax expense (benefit) and cash operating taxes over the five-year period reveals notable fluctuations and trends.

Income Tax Expense (Benefit)

The income tax expense (benefit) displays significant variability. Starting with a benefit of $483 million in 2017, the company experienced a positive tax expense of $176 million in 2018, followed by a smaller expense of $20 million in 2019. In 2020, the tax expense reverted to a benefit of $83 million, before increasing sharply to an expense of $272 million in 2021. This volatility indicates fluctuations in taxable income or changes in tax strategies and could reflect variations in profitability or one-time tax adjustments across the years.

Cash Operating Taxes

Cash operating taxes show a relatively stable trend from 2017 to 2021, with values ranging from $275 million to $445 million. There was an increase from $386 million in 2017 to a peak of $445 million in 2018, followed by a decline to $275 million in 2019. The tax paid then rose again to $355 million in 2020 and $384 million in 2021. This pattern suggests that while the accounting income tax expense experienced fluctuations, the actual cash taxes paid remained consistently substantial, with some variability potentially influenced by operational results or tax payment timing.

Total reported debt & leases

There is a noticeable upward trend in total reported debt and leases from 2017 to 2021. The figure increased steadily from $6,683 million in 2017 to $7,846 million in 2020, followed by a significant jump to $10,809 million in 2021. This represents a substantial rise in the company's leverage, particularly in the last reported year.

Stockholders’ equity

Stockholders’ equity shows a consistent decline over the five-year period. Starting at $13,527 million in 2017, equity decreased each year, reaching $6,528 million in 2021. This reduction suggests a diminishing net asset base, possibly impacted by accumulated losses, dividends, or repurchases, which may be cause for deeper examination into retained earnings and other equity changes.

Invested capital

Invested capital decreased from $20,519 million in 2017 to $16,335 million in 2020, indicating a reduction in the company’s total funds invested in operations. However, 2021 saw a slight increase to $16,745 million, which could reflect either asset acquisition or other forms of reinvestment. Despite the modest recovery, the overall trend indicates contraction in invested capital over the period analyzed.

Economic Profit

Economic profit exhibited significant fluctuations over the observed period. It started with a substantial negative value of -1663 million US dollars in 2017, improved notably in 2018 to -519 million, indicating a reduction in economic loss. However, the company experienced a sharp decline in 2019 and 2020, with economic profit plunging to -2304 million and -2593 million respectively. By 2021, economic profit improved considerably again to -473 million, reflecting efforts to mitigate losses but still remained negative throughout the period.

Invested Capital

The invested capital consistently decreased from 2017 to 2020, starting at 20,519 million US dollars and declining each year to 16,335 million in 2020. This trend suggests a gradual reduction in the company's capital base during this timeframe. In 2021, this trend reversed slightly, with invested capital increasing marginally to 16,745 million, indicating a potential stabilization or cautious increase in investments after a period of contraction.

Economic Spread Ratio

The economic spread ratio, reflecting the difference between return on invested capital and cost of capital, remained negative across all years. Beginning at -8.11% in 2017, it improved substantially in 2018 to -2.88%. However, it deteriorated again in 2019 and 2020, reaching lows of -13.59% and -15.88%, which aligns with the deepest economic profit losses seen in those years. By 2021, the ratio rebounded to -2.82%, the best position in the period, consistent with the economic profit improvement, though still indicating the company did not generate returns exceeding its capital cost.

Revenue Trend

The revenue demonstrates fluctuations over the reviewed period. It increased slightly from 9,256 million US dollars in 2017 to 9,407 million US dollars in 2018, followed by a decline to 8,877 million US dollars in 2019 and further to 8,612 million US dollars in 2020. In 2021, revenue showed a notable recovery, rising substantially to 11,063 million US dollars, indicating a positive turnaround in business activity or market demand.

Economic Profit Analysis

The economic profit consistently remained negative throughout the period, indicating losses from an economic profit perspective. It started at -1,663 million US dollars in 2017 and improved to -519 million US dollars in 2018, which was the least negative point during the period. However, losses deepened substantially to -2,304 million US dollars in 2019 and further to -2,593 million US dollars in 2020. In 2021, economic profit improved significantly, reducing losses to -473 million US dollars, paralleling the revenue increase.

Economic Profit Margin Insights

The economic profit margin follows a similar pattern to economic profit values, consistently being negative, which suggests the company operated below its cost of capital throughout the timeline. The margin showed improvement from -17.97% in 2017 to -5.52% in 2018, but then worsened to -25.95% in 2019 and -30.11% in 2020. The most recent figure in 2021 shows a substantial improvement to -4.27%, reflecting a reduction in losses relative to revenue and indicating a movement toward more efficient capital use despite remaining negative.

Overall Interpretation

The data reveals a challenging economic environment for the company from 2017 to 2020 with consistent economic losses and a declining revenue trend in the middle years. The improvements in 2021 in revenue, economic profit, and economic profit margin suggest efforts towards financial recovery and enhanced operational effectiveness. Nonetheless, the economic profit margin's negative status indicates that despite recent gains, the company has yet to achieve full economic profitability.