SolarEdge Technologies Inc. (NASDAQ:SEDG)

Return on Assets (ROA)

The return on assets exhibited a downward trend over the five-year period. Starting at 13.36% in 2018, the ROA decreased to 9.81% in 2019, then further dropped to 5.76% in 2020. A slight stabilization occurred in 2021 at 5.85%, followed by a significant decline to 2.2% in 2022. This indicates a diminishing efficiency in utilizing assets to generate profit.

Financial Leverage

Financial leverage increased from 1.71 in 2018 to a peak of 2.24 in 2020. Following this peak, the leverage ratio slightly declined to 2.21 in 2021 and then reduced more notably to 1.96 in 2022. This pattern suggests an initial increase in debt or liabilities relative to equity, followed by a reduction, indicating possible deleveraging or improved equity position in the latter years.

Return on Equity (ROE)

The return on equity followed a trend similar to that of ROA but with more pronounced decreases. Starting at a high of 22.91% in 2018, ROE dropped to 18.06% in 2019 and then sharply declined to 12.92% in 2020. It remained virtually unchanged in 2021 at 12.91% before plummeting to 4.31% in 2022. This sharp decrease may reflect reduced profitability or increased costs impacting shareholders' returns.

Net Profit Margin

The net profit margin demonstrates a consistent decline from 13.75% in 2018 to 3.02% in 2022. The most significant drop occurs between 2021 and 2022, where the margin falls from 8.61% to 3.02%, indicating decreasing profitability relative to sales over the period analyzed.

Asset Turnover

Asset turnover decreases sharply from 0.97 in 2018 to 0.6 in 2020, indicating less efficient use of assets to generate revenue. After 2020, there is a gradual improvement to 0.73 by 2022, though the ratio remains below the initial levels observed in 2018.

Financial Leverage

Financial leverage increases from 1.71 in 2018 to a peak of 2.24 in 2020, suggesting higher reliance on debt financing. From 2020 onwards, the ratio decreases to 1.96 in 2022, indicating a reduction in leverage but still at a level higher than in 2018 and 2019.

Return on Equity (ROE)

ROE experiences a marked decline over the observed period, falling from 22.91% in 2018 to 4.31% in 2022. The decline aligns with the decreasing net profit margin and changing asset turnover and leverage levels. Notably, the most pronounced decrease occurs in the final year, coinciding with the drop in net profit margin.

Summary

Overall, the data indicates a downward trend in profitability and efficiency from 2018 through 2022. Despite some recovery in asset turnover post-2020 and a reduction in financial leverage after a peak the same year, the company’s net profit margin and ROE have significantly deteriorated. This suggests challenges in maintaining profit margins and returns on equity, potentially impacted by operational inefficiencies or external market pressures.

Tax Burden

The tax burden ratio declined overall during the period, with an initial drop from 0.93 in 2018 to 0.81 in 2019, followed by a slight recovery to 0.9 in 2021 before a sharp decrease to 0.53 in 2022. This indicates a significant reduction in the proportion of earnings retained after tax in the most recent year.

Interest Burden

The interest burden ratio showed relative stability, remaining close to 0.95 over the five years, with a minor decline from 0.98 in 2018 to 0.94 in 2022. This suggests consistent interest expense relative to earnings before interest and taxes throughout the period.

EBIT Margin

There was a steady and notable decline in EBIT margin, dropping from 15.06% in 2018 to 6.07% in 2022. The margin decreased each year, reflecting weakening operating profitability and possibly rising costs or pricing pressures.

Asset Turnover

Asset turnover experienced a significant drop from 0.97 in 2018 to 0.6 in 2020, with a subsequent modest recovery to 0.73 by 2022. This pattern points to reduced efficiency in using assets to generate sales, partially improving in the latter years but still below earlier levels.

Financial Leverage

Financial leverage increased from 1.71 in 2018 to a peak of 2.24 in 2020, indicating a greater use of debt relative to equity during that period. However, it decreased afterward to 1.96 in 2022, suggesting some deleveraging in recent years.

Return on Equity (ROE)

ROE showed a pronounced downward trend, falling from a high of 22.91% in 2018 to 4.31% in 2022. This decline reflects reduced profitability for shareholders, influenced by lower operating margins, decreased asset efficiency, and variations in leverage.

The financial data reveals discernible trends in profitability, efficiency, and return metrics over the five-year period.

Net Profit Margin (%)

The net profit margin demonstrates a consistent downward trajectory, decreasing from 13.75% in 2018 to just 3.02% in 2022. This indicates a significant decline in the company's profitability relative to its sales over the analyzed period. The margin contracted steadily year-over-year, with the most pronounced drop occurring between 2021 and 2022, suggesting increasing costs, pricing pressures, or other operational challenges adversely impacting profit generation.

Asset Turnover (ratio)

The asset turnover ratio, which measures the efficiency of asset utilization to generate revenue, declined sharply from 0.97 in 2018 to 0.6 in 2020. Following this low point, there is a modest recovery, rising to 0.73 by 2022. This pattern suggests that asset use efficiency worsened considerably through 2020 but began improving slightly thereafter, possibly indicating operational adjustments or increased asset productivity.

Return on Assets (ROA) (%)

Return on assets follows a downward trend similar to the net profit margin. ROA decreased from 13.36% in 2018 to a low of 2.2% in 2022. This decline reflects diminishing overall profitability relative to the total assets held, which could be linked to the reduced net profit margin and fluctuations in asset utilization. The minimal increase observed between 2020 and 2021 was insufficient to reverse the longer-term decline.

In summary, the company experienced weakening profitability and asset efficiency over the five years, with notable declines in net profit margin and return on assets. Although asset turnover showed some recovery after 2020, it remained below historical levels, signaling ongoing challenges in converting assets into sales and profits effectively.

Tax Burden

The tax burden ratio exhibits a fluctuating trend over the observed periods, starting relatively high at 0.93 in 2018, decreasing to 0.81 in 2019, and partially recovering to 0.9 in 2021 before a significant decline to 0.53 in 2022. This indicates increased effective tax rates impacting net income particularly in the last year.

Interest Burden

The interest burden ratio remains relatively stable throughout the five-year period, ranging narrowly between 0.94 and 0.98. This suggests consistent management of interest expenses relative to earnings before interest and taxes, with minor variations.

EBIT Margin

The EBIT margin shows a clear downward trend from 15.06% in 2018 to 6.07% in 2022. This steady decline over the five years points to diminishing operating profitability, potentially due to rising costs, pricing pressures, or other operational challenges.

Asset Turnover

The asset turnover ratio decreases notably from 0.97 in 2018 to 0.6 in 2020, followed by a slight recovery to 0.73 by 2022. This pattern suggests a reduction in efficiency in utilizing assets to generate sales during the earlier years, with some improvement in recent years.

Return on Assets (ROA)

Return on assets declines significantly from 13.36% in 2018 to 2.2% in 2022. The sharp decrease mirrors the combined effect of declining EBIT margins and asset turnover, compounded by the increased tax burden in the most recent year, reflecting deteriorating overall asset profitability.

Tax Burden Ratio Trend

The tax burden ratio demonstrates some fluctuations across the observed periods. It decreased from 0.93 in 2018 to a low of 0.81 in 2019, then increased to 0.9 by 2021 before substantially dropping to 0.53 in 2022. This suggests a significant reduction in the effective tax rate or increased tax benefits in the most recent year, which impacts net profitability positively if other factors are stable.

Interest Burden Ratio Trend

The interest burden ratio remained relatively stable throughout the years, hovering slightly below 1. The values decreased marginally from 0.98 in 2018 to 0.94 in 2022, indicating that interest expenses consume a consistent but slightly larger portion of earnings before interest and taxes (EBIT) over time.

EBIT Margin Trend

The EBIT margin shows a clear declining trend from 15.06% in 2018 to 6.07% in 2022. This steady decrease suggests diminishing operating profitability and may reflect increased operating costs, pricing pressures, or changes in operational efficiency.

Net Profit Margin Trend

Similar to EBIT margin, the net profit margin has continuously declined over the period, from 13.75% in 2018 to a significantly lower 3.02% in 2022. This decline is consistent with reduced EBIT margins and increased impact from taxes and interest expenses, highlighting overall reduced profitability.

Summary of Profitability and Expense Impact

The combination of decreasing EBIT and net profit margins alongside a stable but slightly declining interest burden ratio indicates that operational challenges are the primary driver of reduced net profitability. The notable drop in tax burden ratio in the last year could provide some relief for net profits, but it has not offset the decline in earnings margin substantially.