Paramount Global (NASDAQ:PARA)

Net Operating Profit After Taxes (NOPAT)

The NOPAT shows a fluctuating trend over the period. Starting at 2,342 million US$ in 2018, it increased significantly to 3,590 million US$ in 2019 and further to 3,726 million US$ in 2020. The peak was observed in 2021 with 5,241 million US$, followed by a sharp decline to 1,431 million US$ in 2022. This indicates strong profit growth until 2021, with a notable contraction thereafter.

Cost of Capital

The cost of capital percentage decreased from 14.06% in 2018 to 10.89% in 2019. It then rose to 13.84% in 2020 before slightly decreasing to approximately 12% in both 2021 and 2022. This suggests a general reduction in capital costs after 2018, followed by relative stabilization around 12% in the last two years.

Invested Capital

Invested capital experienced a substantial increase in 2019, jumping from 15,419 million US$ in 2018 to 37,244 million US$. It continued to grow, reaching 41,069 million US$ in 2020 and 45,938 million US$ in 2021. However, a slight decrease to 44,287 million US$ was observed in 2022. This overall growth suggests rising investments over the period, with a minor pullback in the final year.

Economic Profit

Economic profit showed a declining trend, starting positive at 174 million US$ in 2018. It turned negative in 2019 with a loss of 464 million US$, and deteriorated further in 2020 to -1,958 million US$. Minor improvement was seen in 2021 with a loss reduced to -282 million US$, but worsened significantly again in 2022, plunging to -3,894 million US$. This pattern reflects increasing difficulties in generating returns above the cost of capital throughout most of the period, despite fluctuations in operating profit and capital costs.

Net Earnings Attributable to Paramount

The net earnings displayed fluctuations over the observed period. Starting at 1,960 million US$ in 2018, the earnings increased significantly to 3,308 million US$ in 2019. In 2020, there was a decline to 2,422 million US$, followed by a marked recovery in 2021 reaching 4,543 million US$. However, by the end of 2022, net earnings experienced a sharp decrease to 1,104 million US$.

Net Operating Profit After Taxes (NOPAT)

The NOPAT trend showed consistent growth from 2018 through 2021. Beginning at 2,342 million US$ in 2018, it rose steadily to 3,590 million US$ in 2019 and 3,726 million US$ in 2020, before peaking at 5,241 million US$ in 2021. In 2022, NOPAT declined significantly to 1,431 million US$.

Overall Financial Performance Trend

Both net earnings and NOPAT illustrate overall growth periods until 2021, suggesting improved operational efficiency and profitability. The substantial decrease in both indicators in 2022 could reflect adverse conditions impacting profitability, warranting further investigation into underlying causes during this period.

Provision (benefit) for income taxes

The provision for income taxes exhibited significant volatility over the observed period. In 2018, the provision was a positive amount of 273 million USD, which then notably shifted to a benefit (negative provision) of 9 million USD in 2019. This reversal indicates that the company likely recorded a tax credit or adjustment during that year. Subsequently, in 2020, the provision sharply increased to 535 million USD, followed by a further increase to 646 million USD in 2021. However, in 2022, the provision decreased substantially to 227 million USD, yet remained positive. These fluctuations suggest variations in taxable income, tax strategies, or changes in tax regulations impacting the company’s effective tax expense year over year.

Cash operating taxes

Cash operating taxes showed a rising trend from 2018 to 2019, increasing markedly from 322 million USD to 967 million USD, which reflects a substantial increase in cash taxes paid or payable. In 2020, this figure declined significantly to 633 million USD and then rose again to 766 million USD in 2021. The amount decreased once more in 2022 to 519 million USD. Despite the fluctuations, cash operating taxes remained considerably higher than the 2018 level throughout the remaining years, indicating sustained elevated tax payments on an operational cash basis despite some volatility.

Overall Tax Trends

The disparity between the provision for income taxes and cash operating taxes suggests possible timing differences, tax deferrals, or differences between book and taxable income recognition. The volatility in the provision for income taxes compared to the somewhat elevated but fluctuating cash operating taxes indicates complex tax positions and possibly varying tax credits or adjustments over the years. The data reflects an environment of changing tax expenses and cash outflows related to taxes, which should be monitored further for underlying causes such as changes in profitability, tax law, or tax planning initiatives.

The financial data reveals significant shifts in the company's capital structure and financial position over the five-year period ending December 31, 2022.

Total Reported Debt & Leases

The total reported debt and leases initially increased sharply from $11,083 million in 2018 to a peak of $21,622 million in 2020. After this peak, a downward trend is evident, as the figure declined to $19,632 million in 2021 and further to $17,566 million in 2022. This suggests a partial deleveraging strategy following a period of increasing debt levels.

Total Paramount Stockholders’ Equity

Stockholders' equity exhibited a marked rise throughout the timeframe. It grew substantially from $2,804 million in 2018 to $13,207 million in 2019, followed by a steady increase each year, reaching $23,036 million by 2022. This consistent equity growth indicates strengthening capitalization and possibly improved retained earnings or equity infusions over the period.

Invested Capital

Invested capital expanded dramatically from $15,419 million in 2018 to $41,069 million in 2020, continuing upward to a peak of $45,938 million in 2021 before slightly decreasing to $44,287 million in 2022. The general upward trend reflects substantial investment in assets or operational scaling, with a minor contraction in the final year.

In summary, the company significantly increased its equity base and invested capital over the five years, alongside an initial expansion and subsequent reduction in debt levels. The reduction in debt combined with rising equity suggests improved financial stability and potentially enhanced capacity for future investment or debt management.

The economic profit of the company exhibits a downward trend over the observed periods. Starting with a positive value in 2018, it shifts to negative territory in 2019 and continues to decline substantially through 2022, reaching the lowest figure in the dataset. This indicates worsening profitability in terms of economic profit, reflecting challenges in value creation relative to the cost of capital.

Invested capital shows a significant increase from 2018 to 2019, more than doubling in value. This upward trend continues at a moderate pace through 2021, peaking in that year, before experiencing a slight decrease in 2022. The growth in invested capital suggests substantial asset deployment or acquisition activity during the earlier years, with some retrenchment or stabilization by the end of the period.

The economic spread ratio follows a pattern consistent with economic profit. It begins positive in 2018, turns negative in 2019, and shows further decline through subsequent years. The negative values indicate that the returns generated by the company’s invested capital were insufficient to cover its cost, leading to value destruction. The largest negative spread ratio occurs in 2022, highlighting increasing inefficiency or challenges in generating adequate returns.

Summary of performance trends:

The company’s economic profit declined drastically from a positive stance to increasingly negative figures, signaling weakening financial performance and value erosion.

Invested capital expanded rapidly initially but showed signs of stabilization with a slight reduction in the final year.

The economic spread ratio fell into negative values after 2018 and worsened over time, reflecting returns that consistently failed to meet the cost of invested capital.

Analysis of the annual financial data reveals significant fluctuations in the economic profit and associated margins over the observed periods, despite growth in adjusted revenues.

Adjusted Revenues

Adjusted revenues exhibited a general increasing trend, rising from US$14,504 million in 2018 to US$30,014 million in 2022. The most notable increase occurred between 2018 and 2019, nearly doubling the revenues. However, there was a decline in 2020, followed by steady increases in 2021 and 2022.

Economic Profit

Economic profit demonstrated considerable volatility and a downward trajectory overall. It started positive at US$174 million in 2018 but turned negative in 2019, reaching -$464 million. The negative economic profit deepened significantly in 2020 and fluctuated thereafter, reaching a low of -$3,894 million in 2022. This indicates deteriorating profitability when considering the cost of capital.

Economic Profit Margin

The economic profit margin mirrored the trend in economic profit, declining from a positive 1.2% in 2018 to significantly negative margins in subsequent years. It dropped to -1.66% in 2019 and worsened further to -7.68% in 2020. Although slightly improving to -0.98% in 2021, the margin again plunged to -12.98% in 2022, indicating a growing gap between the company’s returns and its economic costs.

Overall, while adjusted revenues increased over the period, the company faced increasing challenges in translating those revenues into economic profit. The growing negative economic profit and margin suggest rising costs, decreased operational efficiency, or other factors eroding shareholder value.