Shockwave Medical Inc. (NASDAQ:SWAV)

Gross Profit Margin

The gross profit margin displayed a consistently increasing trend from 60.03% in 2019 to 86.94% in 2023. This indicates an improving efficiency in production or service delivery, leading to higher profitability at the gross level over the five-year period.

Operating Profit Margin

The operating profit margin showed significant improvement, moving from deeply negative values (-120.76% in 2019 and -96.86% in 2020) to near breakeven in 2021 (-0.37%), followed by positive margins of 25.35% in 2022 and 21.79% in 2023. This suggests a substantial turnaround in operational efficiency and cost management, enabling the company to generate operating profits after sustained losses.

Net Profit Margin

Net profit margin followed a similar trajectory, improving from large losses (-119.06% in 2019 and -96.92% in 2020) to a slight negative margin in 2021 (-3.85%), then surging to a notably high 44.1% in 2022 before moderating to 20.17% in 2023. The 2022 value reflects an exceptional net profitability year, possibly due to one-time gains or improved profitability that year, with a decline in 2023 indicating some normalization or increased expenses.

Return on Equity (ROE)

ROE followed the pattern of profitability metrics, being negative and deteriorating slightly in the early years (-26.53% in 2019 and -29.11% in 2020), then approaching zero in 2021 (-3.78%) and sharply improving to 42.24% in 2022. The subsequent decrease to 22.03% in 2023 still represents a healthy return on shareholder investment, demonstrating an overall recovery in equity returns during the period.

Return on Assets (ROA)

ROA mirrored ROE trends, starting negatively at -22.04% in 2019 and worsening to -24.15% in 2020. It improved to near zero in 2021 (-2.64%), surged to 33.43% in 2022, but decreased considerably to 9.4% in 2023. This suggests the company’s assets generated increasing profit over the period, especially in 2022, although asset utilization efficiency declined somewhat the following year.

Revenue

Revenue demonstrated a strong upward trajectory over the five-year period. Starting at $42.9 million in 2019, it rose significantly each year, reaching $730.2 million by 2023. This indicates robust growth, with particularly large increases observed between 2020 and 2021, and again from 2021 through 2023.

Gross Profit

Gross profit followed a similar growth pattern to revenue, increasing from $25.8 million in 2019 to $634.8 million in 2023. The growth in gross profit was substantial, especially from 2020 onwards, where it more than quadrupled each year, indicating improved operational efficiency or higher margin sales during this period.

Gross Profit Margin

The gross profit margin showed a consistent and meaningful upward trend, rising from 60.03% in 2019 to 86.94% in 2023. This improvement hints at increased profitability per unit of revenue, possibly due to cost reductions, pricing power, or improved product mix. The margin increased steadily each year, reflecting enhanced control over cost of goods sold or more favorable pricing dynamics.

The operating profit margin exhibited a significant and positive trend over the observed period. Initially, the company experienced substantial operating losses, resulting in a negative operating profit margin. However, subsequent years demonstrate a clear progression towards profitability.

Operating Profit Margin Trend

In 2019 and 2020, the operating profit margin was significantly negative, registering at -120.76% and -96.86% respectively. This indicates substantial operating losses relative to revenue. A considerable improvement is then observed in 2021, with the margin moving to -0.37%, signifying a near-breakeven operating performance.

The year 2022 marked a turning point, as the operating profit margin became positive, reaching 25.35%. This represents a substantial increase in profitability from operations. While remaining positive, the operating profit margin experienced a slight decrease in 2023, settling at 21.79%. Despite this decrease, the 2023 margin still demonstrates a strong level of operating profitability.

The progression from large operating losses to positive and substantial operating profit margins suggests successful implementation of strategies to improve operational efficiency and/or increase revenue. The slight decline in the operating profit margin from 2022 to 2023 warrants further investigation to determine the underlying causes, such as increased operating expenses or changes in revenue mix.

Relationship to Revenue

The improvement in the operating profit margin correlates with a substantial increase in revenue. Revenue grew from US$42,927 thousand in 2019 to US$730,230 thousand in 2023. This revenue growth likely contributed significantly to the company’s ability to achieve operating profitability.

The initial operating losses, despite increasing revenue from 2019 to 2020, suggest that operating expenses were growing at a faster rate than revenue. The subsequent improvement in the operating profit margin indicates that expense growth was brought under control, allowing the company to leverage revenue growth into profitability.

Overall, the operating profit margin demonstrates a compelling narrative of improvement, transitioning from significant losses to robust profitability alongside substantial revenue growth.

The net profit margin exhibited significant fluctuations over the five-year period. Initially, the company experienced substantial negative net profit margins, which progressively improved, culminating in positive and then stabilizing margins.

Net Profit Margin Trend

In 2019 and 2020, the net profit margin was significantly negative, registering at -119.06% and -96.92% respectively. This indicates substantial net losses relative to revenue during these years. A considerable improvement is observed in 2021, with the net profit margin increasing to -3.85%, suggesting a reduction in the magnitude of net losses.

A dramatic shift occurred in 2022, as the net profit margin turned positive, reaching 44.10%. This represents a substantial increase in profitability. While the margin decreased in 2023 to 20.17%, it remained positive and indicated continued profitability, albeit at a lower rate than the previous year.

The progression from large negative margins to a positive, though fluctuating, margin suggests a significant change in the company’s operational efficiency and/or revenue generation capabilities. The substantial increase in revenue, coupled with the eventual achievement of positive net income, drove the improvement in the net profit margin. The decrease from 44.10% to 20.17% between 2022 and 2023 warrants further investigation to determine the underlying factors, such as increased costs or a slower growth rate in net income compared to revenue.

Relationship to Revenue

The net profit margin’s improvement closely correlates with the growth in revenue. Revenue increased steadily from US$42,927 thousand in 2019 to US$730,230 thousand in 2023. The ability to translate this revenue growth into positive net income, as evidenced by the margin’s trajectory, is a positive indicator.

Overall, the net profit margin demonstrates a clear trend of improvement, transitioning from significant losses to consistent profitability. However, the recent decrease in margin from 2022 to 2023 suggests a need for continued monitoring and analysis of the factors influencing profitability.

The Return on Equity (ROE) exhibited significant fluctuations over the observed period. Initially negative, the ROE transitioned to positive values, demonstrating a substantial improvement in profitability relative to shareholder equity.

Net Income Trend

Net income moved from substantial losses in 2019 and 2020, totaling approximately US$51.1 million and US$65.7 million respectively, to a loss of US$9.1 million in 2021. A significant turnaround occurred in 2022, with net income reaching US$216.0 million, followed by US$147.3 million in 2023. This positive trend in net income is a primary driver of the ROE improvement.

Stockholders’ Equity Trend

Stockholders’ equity consistently increased throughout the period, rising from US$192.7 million in 2019 to US$668.7 million in 2023. The most substantial increase occurred between 2021 and 2022, growing from US$241.8 million to US$511.3 million. This growth in equity provides a larger base against which to measure returns.

ROE Analysis

The ROE was negative in 2019 and 2020, at -26.53% and -29.11% respectively, reflecting the net losses experienced during those years. In 2021, the ROE remained negative, albeit reduced to -3.78%, indicating a lessening of losses. A dramatic increase was observed in 2022, with the ROE reaching 42.24%, driven by the significant improvement in net income and a substantial increase in stockholders’ equity. While still positive, the ROE decreased to 22.03% in 2023, likely due to a decrease in net income compared to 2022, despite continued growth in equity.

The substantial improvement in ROE from negative values to over 40% suggests a significant positive shift in the company’s ability to generate profits from shareholder investments. The subsequent decrease in ROE in 2023, while remaining positive, warrants further investigation to determine the underlying causes and potential implications for future performance.

The Return on Assets (ROA) exhibited a significant trajectory over the observed period. Initially negative, the ratio transitioned to positive values, demonstrating improving profitability relative to asset utilization. The magnitude of change increased substantially from 2019 through 2023.

ROA Trend (2019-2023)

From 2019 to 2020, ROA declined from -22.04% to -24.15%, indicating a worsening of profitability in relation to assets. This period reflects increasing losses against a growing asset base.

A modest improvement occurred in 2021, with ROA reaching -2.64%. While still negative, this suggests a reduction in losses and/or more efficient asset utilization compared to the prior two years.

2022 witnessed a dramatic positive shift, with ROA surging to 33.43%. This substantial increase is attributable to a significant rise in net income alongside continued asset growth.

In 2023, ROA moderated to 9.40%. While still positive, this represents a considerable decrease from the prior year, likely due to a slower growth rate in net income relative to the substantial increase in total assets.

The progression from consistent losses to positive, albeit fluctuating, returns suggests a potential turning point in the company’s operational efficiency and profitability. However, the decline in ROA in the most recent year warrants further investigation to determine the sustainability of profitability gains given the expanding asset base.

Net Income and ROA Relationship

The ROA figures closely mirror the trend in net income. Negative net income in the earlier years directly resulted in negative ROA values. The substantial increase in net income in 2022 was the primary driver of the corresponding increase in ROA.

The comparatively smaller increase in net income in 2023, coupled with a large increase in total assets, explains the decrease in ROA observed during that period.

The company’s ability to effectively deploy its growing asset base will be crucial in maintaining and improving ROA in future periods.