O’Reilly Automotive Inc. (NASDAQ:ORLY)

The financial performance over the examined five-year period demonstrates consistent growth in profitability metrics.

Net Income

The net income shows a steady upward trend, increasing each year from approximately 1.13 billion US dollars in 2017 to about 2.16 billion US dollars in 2021. This represents a near doubling of net income over the period, suggesting effective management of costs and/or increased revenues contributing to bottom-line growth.

Net Operating Profit After Taxes (NOPAT)

The NOPAT also exhibits a consistent increase over the years, rising from roughly 1.24 billion US dollars in 2017 to approximately 2.36 billion US dollars in 2021. This confirms improving operating efficiency and profitability from core operations after accounting for taxes. The growth in NOPAT outpaces net income slightly, indicating favorable operational performance trends.

The patterns indicate sustained improvement in both net income and operating profits, reflecting positive financial health and operational effectiveness over the analyzed timeframe. No volatility or decline is noted, implying stability and strong earnings progression year on year.

The financial data for the period ending December 31, 2017 through December 31, 2021 reveals notable trends in the company's tax-related expenses.

Net Income Tax Expense

This item exhibits fluctuations over the years with an overall upward trend. Beginning at $504,000 thousand in 2017, the figure decreases significantly to $369,600 thousand in 2018. Thereafter, it rises moderately to $399,287 thousand in 2019, followed by a substantial increase to $514,103 thousand in 2020, and continues to increase, reaching $617,229 thousand in 2021. The data indicates a recovery and growth in net income tax expense after the dip in 2018, potentially reflecting higher taxable income or changes in tax strategy or rates.

Cash Operating Taxes

This measure closely aligns with the net income tax expense pattern but consistently remains higher. It starts at $565,004 thousand in 2017 and follows a similar decline to $392,060 thousand in 2018. Following this, it rises steadily to $422,745 thousand in 2019, then more markedly to $551,050 thousand in 2020, and finally to $641,484 thousand in 2021. The steady increase after 2018 suggests growing cash tax obligations, which could be indicative of increased profitability, changes in tax payments timing, or adjustments in deferred tax assets and liabilities.

Overall, both tax expense and cash operating taxes show a notable decline in 2018, followed by consistent and significant increases through 2021. The gap between cash operating taxes and net income tax expense remains evident, with cash taxes being higher throughout, which may highlight timing differences or other tax accounting adjustments. The progressive increase in taxes by 2021 aligns with likely improvements in company earnings or changes in tax policy impacting the effective tax rates or cash tax payments.

Total Reported Debt & Leases

The total reported debt and leases demonstrated a consistent upward trend from 2017 through 2020, increasing from approximately 4.92 billion US dollars to about 6.16 billion US dollars. However, in 2021, there was a noticeable decline to approximately 5.87 billion US dollars, indicating a reduction in debt levels after several years of accumulation.

Shareholders’ Equity (Deficit)

Shareholders’ equity experienced a significant downward trajectory over the period. Starting at around 653 million US dollars in 2017, equity decreased sharply in 2018 to approximately 354 million US dollars, then displayed a modest rise in 2019 to roughly 397 million US dollars. Following this brief improvement, equity plunged to about 140 million US dollars in 2020 and turned negative by 2021, reaching a deficit of approximately 66 million US dollars. This shift to negative equity signals financial strain and potential solvency concerns.

Invested Capital

Invested capital increased steadily from roughly 5.44 billion US dollars in 2017 to a peak of around 6.20 billion US dollars in 2020. However, in 2021, a decline occurred, bringing invested capital down to approximately 5.77 billion US dollars. This pattern suggests that after a phase of capital expansion, a contraction phase began in the most recent year under review.

Overall Analysis

The financial data reveals increasing leverage up to 2020, followed by a reduction in debt levels in 2021. Concurrently, the persistent decrease in shareholders’ equity, culminating in a deficit, indicates deteriorating net worth and potentially heightened financial risk. The invested capital trajectory reflects these shifts, with initial growth succeeded by a downturn in the final year. Together, these trends suggest the company faced mounting financial pressures, necessitating deleveraging and potentially restructuring efforts in 2021.