O’Reilly Automotive Inc. (NASDAQ:ORLY)

The data reveals several notable trends over the five-year period ending December 31, 2021, related to goodwill and intangibles.

Goodwill

Goodwill showed a generally increasing trend from 2017 through 2019, rising from approximately $789 million to $937 million. However, a slight decline is observed in 2020 and 2021, with values decreasing to approximately $879 million by the end of 2021.

Trade names

Trade names were not reported until 2020, when they appeared with a value of $8.363 million, followed by a slight decline to $8.110 million in 2021. Another entry for trade names appears in 2020 with a substantially higher value ($35.420 million), which marginally decreased to $34.348 million in 2021. This suggests either the recognition of additional trade name assets or reclassification within intangible assets during these years.

Favorable leases

Favorable leases values decreased from $22.5 million in 2017 to $18.9 million in 2018, then ceased to be reported thereafter, indicating possible amortization or derecognition of these assets.

Non-compete agreements

Non-compete agreements show an increasing trend from $1.851 million in 2017 to a peak of $7.183 million in 2020, followed by a slight decrease to $6.915 million in 2021. This reflects growing recognition or acquisition of such agreements during this time frame.

Other intangible assets

Other intangible assets appear starting in 2020 with a recorded $12.2 million and decreased slightly to $11.832 million in 2021.

Finite-lived intangible assets, cost

The cost of finite-lived intangible assets fluctuated over the years. Beginning at approximately $24.351 million in 2017, it dropped to around $21.687 million in 2018, fell sharply to $2.717 million in 2019, then rose again to values around $27.7 million in 2020 and $26.9 million in 2021. These fluctuations may correspond to asset disposals and acquisitions.

Accumulated amortization

Accumulated amortization presents a decreasing negative balance (less accumulated amortization) from 2017 to 2019, moving from -$14.959 million to -$0.928 million, which then sharply increased in absolute terms to -$6.860 million in 2020 and further to -$12.009 million in 2021. This pattern indicates increasing amortization expense in the latter years.

Finite-lived intangible assets, net

Net finite-lived intangible assets declined steeply from $9.392 million in 2017 to $1.789 million in 2019, then experienced a strong recovery to $20.886 million in 2020, before slightly decreasing to $14.848 million in 2021. This reflects significant changes in amortization and asset cost over the period.

Unfavorable leases

Unfavorable leases decreased from $2.617 million in 2017 to $1.694 million in 2018 and were not reported in subsequent years, indicating potential write-offs or reclassification.

Indefinite-lived intangible assets

Indefinite-lived intangible assets align with previous lease and trade name entries, starting at $2.617 million in 2017, decreasing to $1.694 million in 2018, then rising substantially to $35.420 million in 2020 and slightly declining to $34.348 million in 2021. This suggests reclassification or new indefinite-lived assets recognition during this timeframe.

Intangible assets total

Total intangible assets decreased slightly from $12.009 million in 2017 to $10.138 million in 2018 and sharply declined to $1.789 million in 2019. Thereafter, there was a sizable increase to $56.306 million in 2020, followed by a decrease to $49.196 million in 2021. This pattern reflects changes in classifications and amortization impacts.

Goodwill and other intangibles

The aggregate of goodwill and other intangible assets largely correlates with goodwill trends, increasing from approximately $801 million in 2017 to $938 million in 2019. A minor decline occurs in the subsequent years, stabilizing around $928 million in 2021.

Overall, goodwill remains the dominant component, demonstrating relative stability with slight variations over the period. Intangible assets show greater volatility, driven by acquisitions, disposals, amortization, and reclassifications, particularly notable in the categories of trade names, finite-lived intangibles, and indefinite-lived intangibles. The data suggest active management and restructuring of intangible asset portfolios during the analyzed years.

Total Assets

The reported total assets demonstrate a consistent upward trend over the five-year period, increasing from approximately 7.57 billion US dollars in 2017 to about 11.72 billion US dollars in 2021. This increase suggests ongoing asset growth and expansion efforts. Similarly, adjusted total assets, which account for goodwill adjustments, also grow steadily from around 6.78 billion US dollars in 2017 to approximately 10.84 billion US dollars in 2021. The gap between reported and adjusted total assets indicates significant goodwill recorded on the balance sheet.

Shareholders’ Equity

The reported shareholders’ equity shows a marked decrease over the period, starting at roughly 653 million US dollars in 2017 and declining sharply to a negative value of about 66 million US dollars in 2021. This represents a substantial deterioration in reported equity, with a notable negative turn occurring between 2020 and 2021. The adjusted shareholders’ equity, after goodwill adjustment, is negative throughout the entire period and worsens progressively, moving from approximately -136 million US dollars in 2017 down to -946 million US dollars in 2021. This persistent negative adjusted equity suggests that the company’s tangible net assets are significantly impaired, possibly reflecting accumulated losses or high intangible asset valuation adjustments.

Overall Insight

The data reveals a situation where asset growth, both reported and adjusted, is robust, indicating possible ongoing acquisitions or capital investments. However, the consistent decline in both reported and adjusted shareholders’ equity raises concerns about the company’s financial stability and underlying profitability. The negative adjusted equity highlights the impact of goodwill and intangible asset impairments, suggesting that a portion of the asset base may not be generating expected returns. This trend may warrant further investigation into the quality of earnings and the sustainability of the company’s financial position.

The financial data exhibits several notable trends over the five-year period ended December 31, 2021. The reported total asset turnover ratio shows a decline from 1.19 in 2017 and 2018 to 0.95 in 2019, followed by a steady recovery to 1.14 in 2021. The adjusted total asset turnover ratio mirrors this pattern but at slightly higher levels, beginning at 1.32 in 2017, dipping to 1.04 in 2019, and increasing to 1.23 by 2021. This suggests that when goodwill adjustments are considered, the company maintains a higher efficiency in utilizing its assets to generate sales, despite the dip in 2019.

The reported financial leverage ratio shows a significant upward trend from 11.59 in 2017 to an exceptionally high 82.68 in 2020, with no data available for 2021. This sharp increase indicates a substantial rise in the company’s reliance on debt or liabilities relative to equity during this timeframe. Adjusted financial leverage ratios are not provided, which limits the ability to assess leverage impact when goodwill is excluded.

Return on equity (ROE) based on reported figures reveals extreme volatility, with values rising from 173.62% in 2017 to a peak of 1249.34% in 2020, before the absence of data in 2021. Such extraordinary figures likely reflect the influence of increased financial leverage, which magnifies returns to equity holders but also indicates heightened risk. Due to missing adjusted ROE values, it is not possible to discern the effect of goodwill on these returns.

The reported return on assets (ROA) demonstrates moderate fluctuations, starting at 14.97% in 2017, slightly decreasing to 12.98% in 2019, then increasing to 18.47% in 2021. The adjusted ROA figures, which exclude goodwill, consistently exceed reported values, ranging from 16.72% in 2017 to 19.97% in 2021. This consistent premium in adjusted ROA suggests that the company’s core assets, excluding goodwill, generate returns more efficiently than the total asset base would indicate.

Summary of Trends:

- Total asset turnover decreased notably in 2019 but recovered by 2021; adjusted figures indicate relatively higher asset efficiency consistently.

- Financial leverage showed a pronounced increase through 2020, potentially increasing both risk and return; lack of adjusted data limits comprehensive analysis.

- ROE exhibits extreme volatility and very high magnitudes, likely driven by leverage effects, but adjusted data is unavailable for clarification.

- ROA shows moderate improvement over time, with adjusted ROA consistently higher, underscoring better operational profitability excluding goodwill.

The data reveals a general upward trend in both reported and adjusted total assets for the company over the five-year period. Reported total assets increased from approximately $7.57 billion in 2017 to around $11.72 billion in 2021, indicating steady growth in asset base. Similarly, adjusted total assets, which presumably account for goodwill adjustments, also show growth from about $6.78 billion in 2017 to $10.84 billion in 2021, mirroring the overall asset expansion but at consistently lower levels due to adjustments.

Regarding asset turnover ratios, which measure the efficiency of asset utilization to generate revenue, a divergent pattern exists between reported and adjusted figures. The reported total asset turnover ratio remains stable at 1.19 for 2017 and 2018 but declines significantly to 0.95 in 2019. After this dip, it recovers somewhat to 1.00 in 2020 and further to 1.14 in 2021, though not fully reaching the initial levels observed in 2017 and 2018.

In contrast, the adjusted total asset turnover ratio starts higher at 1.32 in 2017 and slightly increases to 1.33 in 2018. It then declines to 1.04 in 2019 but maintains a more consistent performance than the reported ratio, rising slightly to 1.08 in 2020 and accelerating to 1.23 in 2021. This suggests that when goodwill adjustments are considered, asset efficiency is portrayed as stronger and more stable over time.

Overall, the firm demonstrates asset growth along with some fluctuations in asset turnover efficiency. The adjustment for goodwill notably affects the asset base magnitude and presents improved turnover ratios, indicating that non-goodwill assets may be managed more effectively than reflected in reported figures alone. The recovery and improvement in asset turnover from 2019 onwards points to potentially enhanced operational efficiency or better utilization of assets in recent years.

The financial data reveals several notable trends over the five-year period ending December 31, 2021.

Total Assets

Reported total assets increased consistently from approximately 7.57 billion US dollars in 2017 to about 11.72 billion in 2021, showing steady asset growth over the period.

Adjusted total assets, which exclude goodwill, follow a similar upward trend but with consistently lower values, increasing from roughly 6.78 billion to 10.84 billion US dollars. This indicates a significant portion of total assets consists of goodwill or other intangible assets.

Shareholders’ Equity

Reported shareholders’ equity exhibited a declining trend, starting at around 653 million US dollars in 2017 and ending with a negative value of approximately -66 million in 2021. This downturn reflects deteriorating net asset value over the period.

Adjusted shareholders’ equity, which presumably excludes goodwill, was negative throughout the entire period and worsened steadily from about -136 million in 2017 to nearly -946 million US dollars in 2021. This persistent and growing deficit suggests continued challenges in underlying net asset values once intangible assets are removed.

Financial Leverage

Reported financial leverage increased dramatically from 11.59 in 2017 to a peak of 82.68 in 2020, before the data becomes unavailable for 2021. This sharp rise indicates an increasing reliance on debt or liabilities relative to equity, likely driven by the shrinking shareholder equity.

Adjusted financial leverage data is unavailable, preventing direct analysis of leverage excluding goodwill.

Overall, the data illustrates expanding total assets but shrinking equity, particularly when adjusted for goodwill, indicating potential concerns about balance sheet strength and capitalization. The rapid increase in financial leverage further highlights increased financial risk, primarily due to diminishing equity bases.

The data presents an overview of equity and return on equity (ROE) metrics over a five-year period. The reported shareholders’ equity demonstrates a declining trend, starting from a positive value of approximately 653 million US dollars at the end of 2017 and dropping sharply to a deficit of around 66 million US dollars by the end of 2021. This indicates a significant erosion of equity base over the period.

In contrast, the adjusted shareholders’ equity, which likely accounts for goodwill impairments or other adjustments, remains negative throughout the entire time frame and shows a consistent downward trend. It deteriorates from about -136 million US dollars in 2017 to nearly -946 million US dollars by the close of 2021, suggesting that the company's adjusted net asset position is substantially negative and worsening.

Regarding return on equity, the reported ROE exhibits extreme volatility and high values, peaking at 1249.34% in 2020 before data for 2021 is unavailable. The extremely high ROE percentages, particularly in 2018, 2019, and 2020, may be indicative of a very low or negative equity base inflating the ratio rather than strong profitability. The absence of values for adjusted ROE prevents assessment of underlying operational returns after adjustments.

Shareholders’ Equity

Steady decline in reported equity culminating in a deficit by 2021.

Adjusted equity remains negative and worsens over the years, pointing to significant intangible asset impairments or accounting adjustments.

Return on Equity (ROE)

Reported ROE shows unusual spikes, likely due to diminishing equity levels inflating the metric.

Adjusted ROE data is not available, limiting deeper analysis of profitability on the adjusted equity base.

Overall, the financial position reflected by shareholders’ equity metrics suggests increasing financial strain. The extreme ROE values, coupled with a declining and negative equity position, signal potential risks concerning solvency and asset valuation integrity over the analyzed period.

Total Assets

The reported total assets show a consistent upward trend across the period from December 31, 2017, to December 31, 2021. The value increased from approximately $7.57 billion in 2017 to about $11.72 billion in 2021, indicating steady asset growth. Adjusted total assets demonstrate a comparable rising pattern, growing from approximately $6.78 billion in 2017 to $10.84 billion in 2021. The gap between reported and adjusted asset values narrows slightly over time, suggesting a relative decrease in goodwill or other adjustments affecting asset valuation.

Return on Assets (ROA)

The reported ROA fluctuates during the period, starting at 14.97% in 2017, peaking at 16.6% in 2018, declining to 12.98% in 2019, then rising again to 15.11% in 2020 and reaching its highest point of 18.47% in 2021. This indicates varying efficiency in asset utilization over the years, with improved profitability in the later periods. Adjusted ROA follows a similar trend but at consistently higher percentages, beginning at 16.72% in 2017 and reaching 19.97% in 2021. The adjusted ROA's premium over reported ROA suggests that excluding goodwill or similar adjustments highlights stronger asset profitability.

Overall Patterns and Insights

The data reflects a company expanding its asset base steadily over five years, with improved returns on those assets particularly notable in the adjusted figures. The rise in adjusted ROA exceeding reported ROA by a margin indicates that the excluded items, likely goodwill, have a dilutive effect on reported profitability measures. Despite some volatility in reported ROA, the general upward trajectory in both ROA measures by 2021 indicates enhanced operational efficiency and profitability. The narrowing difference between reported and adjusted total assets suggests reduced relative intangible assets or write-downs over time.