Palo Alto Networks Inc. (NASDAQ:PANW)

Return on Assets (ROA)

The Return on Assets demonstrates a clear negative trend from late 2018 through early 2022, with values deteriorating from around -1.24% to a low of -4.89%. This period reflects increasing inefficiency in asset utilization. Starting in early 2022, a positive inflection is observed, with ROA improving progressively, turning positive by early 2023, and peaking near 13.65% around early 2024. The subsequent slight decline towards mid-2025 still maintains ROA above 5%, indicating a significant recovery and improved asset profitability over time.

Financial Leverage

Financial leverage exhibits considerable volatility throughout the observed periods. Initial values ranged between 4.16 and 5.33, followed by sharp elevations, reaching extreme peaks such as 88.29 in early 2022, indicative of substantially increased reliance on debt or liabilities relative to equity. Following this peak, financial leverage declines markedly to stabilize around a lower range of approximately 3.04 to 4.63 by mid-2025. This trend suggests a phase of both heightened risk exposure followed by conservative deleveraging and a move towards financial stability.

Return on Equity (ROE)

The Return on Equity trend mirrors a similar initial decline as ROA but with far more pronounced negative values, plunging as low as -391.77% in early 2022, which indicates substantial losses relative to shareholder equity and potential operational or financial challenges. After this nadir, ROE rebounds sharply from mid-2022 onward, transitioning from highly negative to positive territory by early 2023. It climbs steadily, achieving peaks exceeding 54% by early 2024, before a slight reduction towards mid-2025 while remaining robustly positive. This recovery points to improved profitability and shareholder value generation during the latter periods.

Summary Insights

Overall, the data points to a challenging financial performance phase spanning approximately 2019 through early 2022, characterized by declining profitability and increasing financial risk as indicated by poor ROA, steeply negative ROE, and spiking financial leverage. A turning point emerges around early 2022, where enhanced operational efficiency, reduced leverage, and strong profitability gains suggest effective management responses or strategic changes. The subsequent years reflect a period of financial stabilization and improved returns to shareholders, with both profitability ratios improving significantly and leverage metrics coming down from extreme levels to more moderate, sustainable values.

Over the analyzed quarters, several key financial ratios exhibit distinct trends reflecting changes in profitability, efficiency, and capital structure.

Net Profit Margin (%)

Initially, the net profit margins were negative, starting at -2.82% in mid-2019 and deteriorating further to reach a low of -11.72% by late 2021. After this period of sustained negative margins, a notable recovery commenced around early 2023, with margins moving from slightly negative to positive territory. The margin peaked at over 30% in early 2024 but then declined moderately to around 14% by mid-2025, indicating some volatility in profitability.

Asset Turnover (ratio)

The asset turnover ratio has remained relatively stable, fluctuating slightly around values between 0.38 and 0.5 throughout the period. There is no significant upward or downward trend, suggesting consistent efficiency in using assets to generate sales. Minor oscillations might indicate normal operational variations, but overall asset utilization remained steady.

Financial Leverage (ratio)

Financial leverage showed considerable volatility and a wide range over the observed timeline. Initial values around 4 to 5 were followed by sharp spikes, peaking at an unusually high level of 88.29 in early 2022, which could indicate extraordinary financing activity or accounting adjustments during that quarter. Afterward, the leverage ratio gradually decreased and stabilized closer to levels between 3 and 6 by mid-2025, suggesting a reduction in reliance on debt or adjustments in capital structure for improved financial stability.

Return on Equity (ROE %)

The return on equity experienced a substantial decline initially, with negative values worsening significantly from around -5% to extreme lows near -391% in early 2022, reflecting deteriorated profitability and equity losses during that period. However, from mid-2023 onward, ROE improved markedly, reaching levels above 50% by early 2024, which signals a strong rebound in generating profits for shareholders. Despite this recovery, the ratio showed some decrease thereafter, ending around 17-20% by mid-2025, which still represents a positive return compared to earlier years.

Tax Burden

The tax burden ratio data is available only from January 2023 onward. It shows a notable increase to 2.63 in October 2023, followed by a slight decline and some fluctuations, ultimately trending downward to 0.94 by April 2025. This suggests variability in tax expenses relative to pre-tax income during this period.

Interest Burden

Interest burden ratios are sparse, with a significant negative value of -8.02 in April 2019 indicating unusual or elevated interest expenses that severely impacted profits. From January 2023 onwards, the ratio stabilizes close to 1.00, implying very low interest expense burden and improved operating income coverage over interest costs.

EBIT Margin

The EBIT margin data begins in April 2019 and reveals a persistent negative margin through most of 2019 and 2020, reaching a low point around -7.55% in January 2022. From early 2022, a steady recovery trend is observed, with margins turning positive by April 2023 and improving substantially to reach 14.94% by April 2025. This exhibits a successful operational turnaround and increasing profitability.

Asset Turnover

The asset turnover ratio fluctuates moderately throughout the periods analyzed, mostly ranging between 0.38 and 0.50. No clear upward or downward trend emerges, indicating stable but modest efficiency in asset utilization to generate revenue over these years.

Financial Leverage

Financial leverage shows significant variability. Starting at moderate levels around 4 to 5 in 2018-2019, leverage peaks dramatically at 88.29 in January 2022, reflecting a sharp increase in debt or other liabilities relative to equity. Post this peak, there is a notable deleveraging trend with leverage declining steadily, reaching approximately 3.04 by April 2025. This pattern suggests aggressive borrowing followed by risk reduction and stronger equity positioning.

Return on Equity (ROE)

ROE remains negative from early data points until late 2022, with pronounced losses especially in 2021 and early 2022 (down to -391.77%), indicating significant shareholder value erosion during this period. Beginning in late 2022, ROE demonstrates a strong recovery trajectory, becoming positive by early 2023 and peaking around 54.78% in April 2024. However, it declines somewhat afterward to 17.12% by April 2025, still maintaining a positive performance level. This reflects a substantial improvement in profitability and capital efficiency after a prolonged period of financial distress.

Net Profit Margin

The net profit margin demonstrates a clear negative trend from the earliest reported period through January 2023. Initially, it declined from -2.82% to a low of -11.72%, indicating increasing net losses relative to revenue. After reaching this trough, the margin gradually improved, turning positive around April 2023 at 0.56%, and continued to increase significantly to peak values exceeding 30% in the periods from January 2024 to July 2024. However, in the last two recorded periods, it declined back to approximately 14.64% and 13.95%, signaling some volatility but maintaining a positive profitability stance.

Asset Turnover

Asset turnover ratios have exhibited moderate fluctuations within a narrow range throughout the periods. Early figures start around 0.44 and show slight decreases and increases, generally oscillating between 0.38 and 0.5. There is no clear long-term upward or downward trend, suggesting stable efficiency in asset utilization relative to revenue generation. Notably, no significant deterioration or improvement is observed even during periods of low profitability.

Return on Assets (ROA)

ROA follows a pattern that roughly parallels the net profit margin. Initially, it remains negative and deteriorates from -1.24% to approximately -4.89%, indicating losses generated from asset investments. Starting around January 2023, ROA turns positive and improves substantially to over 12% by January through July 2024, reflecting enhanced profitability derived from assets. Similar to the net margin, there is a slight dip in the final two periods, though ROA remains strongly positive, suggesting a recovery phase following previous losses.

Tax Burden

The tax burden ratio is largely unavailable for most of the periods until early 2023. From the first available data point in 2023, there is a notable fluctuation starting at 0.41 and increasing sharply to values above 2.5 in mid-2023. Towards the last few quarters, the ratio declines again to values near 0.94 to 0.99, indicating variability and possible changes in tax obligations or tax shields during this timeframe.

Interest Burden

The interest burden ratio shows sparse early data with a negative and significantly low value in early 2019. Starting from 2023, the ratio stabilizes and gradually increases from 0.75 to almost 1.0 by early 2025, demonstrating an improved ability to cover interest expenses relative to earnings before interest and taxes and signaling enhanced financial health regarding interest obligations.

EBIT Margin

The EBIT margin initially shows a negative trend from 2019 through mid-2022, deteriorating from -0.24% to a low of around -7.55%. This persistent negative margin indicates ongoing operational challenges or high costs relative to revenues. However, starting from late 2022, a strong positive turnaround occurs, with margins consistently improving and reaching approximately 14.9% by early 2025, reflecting increased operational efficiency and profitability.

Asset Turnover

The asset turnover ratio is relatively stable throughout the observed periods, fluctuating modestly around 0.4 to 0.5. Some minor peaks are observed mid-2019 and early 2023, but overall there is no significant upward or downward trend, suggesting consistent efficiency in generating sales from assets over time.

Return on Assets (ROA)

ROA exhibits a prolonged period of negative returns from 2019 through early 2022, declining as low as approximately -4.89%. This aligns with the negative EBIT margins and indicates that asset utilization was not producing profits during that period. Beginning in mid-2022, the ROA turns positive and increases significantly, peaking near 13.65% by early 2024. A slight decline is noted thereafter but remains positive, signaling a substantial improvement in asset profitability and overall financial performance.

Tax Burden

The tax burden ratio is only available from January 2023 onwards. It initially shows a moderate value around 0.41 in January 2023, sharply increasing to over 2.5 in the subsequent quarters through 2024. This indicates increasing tax expenses relative to pre-tax income during this period. However, a downward correction occurs beginning January 2025, suggesting a reduction in the relative tax impact.

Interest Burden

Available from April 2019, the interest burden ratio initially shows a significantly negative value, indicating high interest expenses or losses affecting operating income. From January 2023 onwards, the ratio steadily improves toward 1, signifying a reduction in interest expenses relative to earnings, approaching an almost neutral burden by April 2025.

EBIT Margin

The EBIT margin shows a declining trend from early data in 2019, moving deep into negative territory through to around January 2022, with margins as low as -7.55%. From early 2022 onwards, a consistent recovery trend is visible, with EBIT margin turning positive around April 2023 and continuing to increase steadily, reaching approximately 14.94% by April 2025. This reflects an improvement in operational profitability over the latter periods.

Net Profit Margin

Net profit margin follows a similar trend to EBIT margin over the recorded periods. It declines from negative margins in 2019, reaching a low point near -11.72% in late 2021. Starting in 2022, the margin improves notably, becoming positive around early 2023, and reaching exceptionally high levels over 30% in late 2023 and into 2024. A decline is observed again from October 2024 forward, with values dropping back to around 14% by April 2025, yet remaining significantly positive. These fluctuations suggest periods of strong profitability followed by a normalization phase.