Palo Alto Networks Inc. (NASDAQ:PANW)

The financial data reveals several key trends and insights regarding the company's performance from July 31, 2019, through July 31, 2024.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a consistent upward trajectory over the period, growing from approximately 536 million US dollars in 2019 to peak at over 2.61 billion US dollars in 2023. However, in 2024, there is a slight decline to around 2.50 billion US dollars. This overall growth indicates improving operational efficiency and profitability despite the recent marginal dip.

Cost of Capital

The cost of capital fluctuates moderately throughout the years. Starting at 14.97% in 2019, it slightly decreases to 14.19% in 2020, then varies between 14.37% and 15.69% in subsequent years, ending at a higher rate of 15.69% in 2024. This increase in the cost of capital suggests rising financing costs or increased investment risk perception toward the end of the period.

Invested Capital

Invested capital shows a steady and significant increase from approximately 3.88 billion US dollars in 2019 to over 10.84 billion US dollars in 2024. This growth reflects substantial asset accumulation or reinvestment over time, implying expansion in the company's capital base.

Economic Profit

Economic profit displays a notable transformation during the period. Initially, the company incurs negative economic profit, with losses peaking at about -301 million US dollars in 2020, followed by a reduced loss in 2021. From 2022 onwards, economic profit turns positive, reaching a high of approximately 1.23 billion US dollars in 2023, before declining to around 800 million US dollars in 2024. This shift from losses to significant positive economic profit indicates improving value creation exceeding the cost of capital, although the downward adjustment in 2024 may warrant further examination.

Overall, the company demonstrates a positive growth trajectory in operational profit and capital investment, accompanied by improving economic profitability since 2022. The rising cost of capital indicates potential challenges in financing conditions. The slight decreases in NOPAT and economic profit in 2024 suggest early signs of moderation in performance that should be monitored closely.

Net Income (Loss)

The net income showed a significant fluctuation during the analyzed period. Initially, there was a considerable loss of $81.9 million in 2019, which worsened substantially to a loss of $267 million in 2020, and further to nearly $499 million in 2021. However, starting in 2022, the trend reversed with a notable recovery where the loss decreased back to $267 million. Subsequently, the company turned profitable with net income rising sharply to $439.7 million in 2023 and then increasing substantially to approximately $2.58 billion in 2024. This turnaround suggests effective changes in operations or strategy leading to improved profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibited steady growth throughout the entire period. Starting at $536.4 million in 2019, it increased consistently each year, reaching $696.4 million in 2020, then $845.1 million in 2021. A marked acceleration happened in 2022 when NOPAT doubled to approximately $1.72 billion, followed by continued growth to $2.61 billion in 2023. There was a slight decrease in 2024 to about $2.5 billion, yet the figure remains significantly higher than in the initial years. The growth in NOPAT indicates enhanced core operational efficiency and profitability, despite minor recent decline.

Provision for (benefit from) income taxes

The provision for income taxes shows considerable volatility across the years. From 2019 to 2020, it increased significantly from 7,300 to 35,200 thousand US dollars, followed by a slight decrease to 33,900 thousand US dollars in 2021. A notable increase occurred again in 2022 and 2023, reaching 59,800 and 126,600 thousand US dollars, respectively. The year 2024 exhibits a substantial negative value of -1,589,300 thousand US dollars, indicating a significant tax benefit in that period. This reversal may warrant further investigation to understand the underlying causes, such as tax credits, loss carrybacks, or other accounting adjustments.

Cash operating taxes

Cash operating taxes demonstrate a steady upward trend over the six-year period. Starting at 32,566 thousand US dollars in 2019, cash tax payments rose consistently each year, reaching 57,464 in 2020, 81,834 in 2021, with a slight dip to 68,221 in 2022, then increasing again to 76,038 in 2023. The 2024 figure spikes sharply to 384,452 thousand US dollars, representing a dramatic increase compared to previous years. This substantial rise in cash taxes in 2024 contrasts with the large tax benefit recorded in the provision for income taxes, highlighting potential differences between accounting provisions and actual cash tax payments.

Total reported debt & leases

The total reported debt and leases showed an increasing trend from July 31, 2019, reaching a peak in July 31, 2022, with a value of 4,015,200 thousand US dollars. After this peak, a significant decline occurred over the subsequent two years, dropping to 2,330,900 thousand US dollars in 2023 and further down to 1,410,300 thousand US dollars in 2024. This pattern indicates a strategy of leveraging more debt until 2022, followed by notable deleveraging or repayment actions thereafter.

Stockholders’ equity

Stockholders’ equity decreased sharply from 1,586,300 thousand US dollars in 2019 to a low point of 210,000 thousand US dollars in 2022. This was followed by a robust recovery, with equity rising significantly to 1,748,400 thousand US dollars in 2023 and further increasing to 5,169,700 thousand US dollars in 2024. The equity trend reflects a period of diminished net asset value, potentially due to operational losses or share repurchases, followed by strong capital retention or additional equity infusions in the later years.

Invested capital

Invested capital exhibited consistent growth throughout the entire period. Starting at 3,879,623 thousand US dollars in 2019, it nearly doubled by 2020 and continued to rise annually, reaching 10,841,500 thousand US dollars in 2024. This steady increase suggests ongoing investments in the company's operations and assets, supporting growth initiatives despite fluctuations in debt and equity.

Economic Profit

The economic profit demonstrated a significant improvement over the analyzed periods. Initially, the company recorded negative economic profit, with a loss of approximately $44.3 million in 2019. This negative trend deepened in 2020 and 2021, reaching a peak deficit of roughly $300.9 million and $244.8 million, respectively. However, starting in 2022, the economic profit shifted positively to about $466.9 million, followed by a substantial increase to around $1.23 billion in 2023. Although there was a decline in 2024, the economic profit remained positive at approximately $800.3 million. This recovery indicates a turnaround in value creation, moving from significant economic losses to robust economic gains.

Invested Capital

Invested capital showed a consistent upward trajectory across the years. Beginning at about $3.88 billion in 2019, the capital base nearly doubled to approximately $7.03 billion by 2020. Growth continued but at a slower pace to around $7.36 billion in 2021. From 2022 onward, invested capital steadily increased, reaching roughly $8.7 billion in 2022, $9.13 billion in 2023, and peaking at approximately $10.84 billion in 2024. This trend reflects ongoing investments and possibly expansion activities, supporting the company's operational capabilities and future growth potential.

Economic Spread Ratio

The economic spread ratio, which measures the difference between return on invested capital and the cost of capital, mirrored the economic profit trend. It was negative for the first three years, moving from -1.14% in 2019 to a low of -4.28% in 2020, and then improving slightly to -3.33% in 2021. This indicates that during this period, the company's returns on capital were consistently below its cost of capital, contributing to economic losses. A notable positive shift occurred in 2022, with the spread moving to 5.36%, followed by a peak of 13.44% in 2023. Although it decreased to 7.38% in 2024, the ratio remained significantly positive, signaling that the company was generating returns well above its capital costs during the last three years in the analyzed period.

Adjusted Revenue

There is a consistent upward trend in adjusted revenue over the six-year period. Starting from approximately US$3.51 billion in 2019, the revenue increases each year, reaching over US$10.2 billion by 2024. This steady growth signifies strong sales performance and expanding business operations.

Economic Profit

The economic profit shows significant fluctuations and an overall improvement over the period. From a negative value near -US$44.3 million in 2019, the loss intensifies to approximately -US$300.9 million in 2020 and remains negative at about -US$244.8 million in 2021. However, there is a sharp reversal in 2022, with economic profit becoming positive at roughly US$466.9 million. This upward trend continues, peaking at about US$1.23 billion in 2023 before decreasing to around US$800 million in 2024. The positive values in recent years indicate enhanced profitability and effective cost management relative to the capital employed.

Economic Profit Margin

The economic profit margin follows a pattern consistent with economic profit figures. Initially, the margin is negative, starting at -1.26% in 2019 and declining further to -6.95% in 2020. It improves slightly to -4.48% in 2021 before turning positive at 6.25% in 2022, then more than doubling to 13.34% in 2023. In 2024, the margin decreases to 7.84%, yet remains in positive territory. The margin trends reflect the transition from losses to profitability relative to revenue, suggesting improved operational efficiency and return on invested capital over time.