Steel Dynamics Inc. (NASDAQ:STLD)

Customer, vendor and scrap generator relationships

The value increased consistently from 394,062 thousand USD in 2017 to 526,886 thousand USD by 2020, then stabilized with no change in 2021. This indicates growth in this intangible asset category over the initial four years, followed by a plateau in the most recent period.

Trade names

The reported value showed a slight decline from 130,550 thousand USD in 2017 to 127,350 thousand USD in 2018. Subsequently, it rose significantly to 147,950 thousand USD in 2019 and remained constant through 2020 and 2021, indicating an increase in trade name valuation or acquisition followed by stability.

Other intangible assets

The value was steady at 2,165 thousand USD for 2017 and 2018, then decreased to 1,350 thousand USD from 2019 through 2021, suggesting impairment, disposal, or reclassification of minor intangible assets in this category starting in 2019.

Intangible assets, gross

The gross intangible assets exhibited a steady upward trend from 526,777 thousand USD in 2017 to 676,186 thousand USD in 2020, maintaining that level in 2021. This reflects overall investment or recognition of intangible assets increasing over the period before leveling off.

Accumulated amortization

Accumulated amortization increased consistently in magnitude from -269,868 thousand USD in 2017 to -380,841 thousand USD in 2021. This demonstrates a systematic amortization of intangible assets over time, resulting in a growing accumulated expense.

Intangible assets, net

Net intangible assets rose from 256,909 thousand USD in 2017 to a peak of 327,901 thousand USD in 2019, followed by a decline to 295,345 thousand USD by 2021. This pattern implies that while gross assets increased, amortization and possible impairments reduced net carrying value in the later years.

Goodwill

Goodwill values increased from 386,893 thousand USD in 2017 to a high of 457,226 thousand USD in 2020, with a slight decrease to 453,835 thousand USD in 2021. This suggests acquisitions or revaluations boosting goodwill until 2020, with minor adjustment or impairment thereafter.

Intangible assets and goodwill combined

The combined total showed an upward trajectory from 643,802 thousand USD in 2017 to 781,803 thousand USD in 2020, followed by a decrease to 749,180 thousand USD in 2021. This overall trend reflects growth in intangible resources and goodwill, tempered by amortization and goodwill adjustments in the last year.

Total Assets

The reported total assets demonstrated a continuous upward trajectory from 2017 through 2021, increasing from approximately $6.86 billion to $12.53 billion. This reflects a growth of approximately 83%. Similarly, the adjusted total assets, which exclude certain goodwill elements, also show a consistent increase, growing from about $6.47 billion in 2017 to $12.08 billion in 2021. Both metrics indicate steady asset base expansion, with the adjusted figures consistently slightly lower than the reported values, highlighting the presence of goodwill.

Equity

Reported equity exhibited a growth trend over the period, rising from approximately $3.35 billion in 2017 to roughly $6.30 billion in 2021, nearly doubling in value. Adjusted equity, excluding goodwill, shows a similar increase from about $2.96 billion in 2017 to $5.85 billion in 2021. The adjusted equity values remain lower than the reported figures each year, indicating the impact of goodwill adjustments. The increase in both reported and adjusted equity aligns with the increase in total assets, suggesting consistent capital growth.

Goodwill Impact

The difference between reported and adjusted figures for both assets and equity suggests the presence of goodwill that increased over the years. The gap between reported and adjusted total assets grows from roughly $382 million in 2017 to approximately $473 million in 2021. Similarly, the discrepancy in equity moves from around $386 million to $453 million. This consistent difference implies that goodwill remains a significant, though not dominant, component of the company's asset and equity base, growing proportionally with overall business expansion.

General Observations

Both reported and goodwill-adjusted values depict strong and sustained growth over the five-year period. The steady increases in assets and equity suggest effective asset utilization and retention or addition of capital. The consistent proportional gap between reported and adjusted figures reflects ongoing acquisitions or goodwill recognition practices. No significant disruptions or declines are observed, indicating stable financial performance and possibly strategic investment in growth initiatives.

Total Asset Turnover

The reported total asset turnover exhibited a fluctuating trend over the observed periods. It initially increased from 1.39 in 2017 to 1.53 in 2018, followed by a decline to 1.26 in 2019 and further down to 1.04 in 2020, before rebounding to 1.47 in 2021. The adjusted total asset turnover mirrored this pattern but generally presented higher values than the reported figures across all years, suggesting the exclusion of goodwill had a positive impact on asset efficiency ratios.

Financial Leverage

Reported financial leverage ratios remained relatively stable, fluctuating narrowly between 1.96 and 2.13 during the five-year span. The peak was observed in 2020 at 2.13, with a slight contraction to 1.99 in 2021. Adjusted financial leverage consistently reported higher values than reported figures and showed a modest upward trend from 2.18 in 2017 to 2.27 in 2020, then decreasing to 2.06 in 2021. This indicates that when goodwill is adjusted out, the company exhibits slightly higher leverage levels.

Return on Equity (ROE)

Both reported and adjusted ROE depict a volatile but overall upward trajectory. Reported ROE climbed from 24.25% in 2017 to peak sharply at 50.98% in 2021, despite declines in the 2019 and 2020 periods. Adjusted ROE follows a similar pattern with consistently higher values compared to reported figures, starting at 27.41% in 2017 and reaching 54.93% in 2021. The fluctuations indicate variability in profitability relative to equity, with the adjustment for goodwill amplifying the return metrics.

Return on Assets (ROA)

ROA figures, both reported and adjusted, demonstrate notable volatility with an overall growth trend. Reported ROA rose from 11.85% in 2017 to 25.65% in 2021, after several years of decline reaching a low point in 2020 at 5.94%. Adjusted ROA exhibited a similar pattern with higher values throughout, starting at 12.56% in 2017 and finishing at 26.61% in 2021. This suggests that operational efficiency and asset profitability improved significantly by the final year after a period of weakening returns.

General Insights

Adjusting financial metrics to exclude goodwill consistently results in higher turnover ratios, leverage, and profitability measures, implying goodwill has a dilutive effect on these ratios. Trends across the years indicate operational and financial performance experienced fluctuations with evident recovery and growth in the most recent period (2021). The improvements in adjusted metrics alongside reported figures indicate a strengthening in both asset utilization and shareholder returns after prior periods of contraction.

The financial data over the five-year period reveals notable trends in asset values and asset turnover ratios for the entity assessed.

Total Assets

Reported total assets show a consistent upward trajectory, increasing from approximately 6.86 billion US dollars at the end of 2017 to about 12.53 billion US dollars by the end of 2021. This represents a substantial growth in asset size, nearing an 83% increase over the period.

Adjusted total assets, which possibly exclude goodwill or other adjustments, mirror this upward trend, rising from approximately 6.47 billion US dollars in 2017 to roughly 12.08 billion US dollars at the end of 2021. This reflects a similar growth pattern and magnitude, indicating that the adjustments do not dramatically alter the overall asset base trend.

Total Asset Turnover

Reported total asset turnover ratios started at 1.39 in 2017, peaked in 2018 at 1.53, then declined over the next two years to a low of 1.04 in 2020 before rebounding to 1.47 in 2021. The decline during 2019 and 2020 suggests a period of decreasing efficiency in generating sales from asset bases, followed by a recovery in 2021.

Adjusted total asset turnover ratios show a similar pattern, beginning higher at 1.47 in 2017 and 1.63 in 2018, declining to 1.09 by 2020, then rising to 1.52 in 2021. The adjusted figures consistently remain slightly higher than reported figures, indicating that after adjusting for goodwill or other factors, asset efficiency ratios appear stronger but follow the same overall trend.

Overall, the data indicates significant growth in asset size accompanied by fluctuating asset turnover ratios, with a notable dip in operational efficiency between 2019 and 2020, followed by improvement in 2021. The adjustments to total assets slightly enhance turnover ratio metrics but do not alter the underlying trends.

The analysis of the financial data over the five-year period reveals several noteworthy trends relating to asset growth, equity development, and leverage ratios.

Total Assets

Reported total assets increased steadily each year, starting at approximately US$6.86 billion in 2017 and reaching about US$12.53 billion by the end of 2021. The adjusted total assets follow a similar upward trajectory, rising from around US$6.47 billion in 2017 to roughly US$12.08 billion in 2021. This consistent growth suggests ongoing asset expansion, with the adjustment for goodwill slightly reducing asset values but not altering the upward trend.

Total Equity

Reported total equity grew from approximately US$3.35 billion at the end of 2017 to about US$6.30 billion in 2021, indicating solid equity accumulation over the years. Adjusted total equity, which accounts for goodwill adjustments, also rose steadily from roughly US$2.96 billion to about US$5.85 billion during the same period. The adjustment consistently lowers the equity base but maintains a clear pattern of growth, reflective of retained earnings and possibly capital injections.

Financial Leverage

The reported financial leverage ratio exhibited minor fluctuations but remained relatively stable, starting at 2.05 in 2017, dipping slightly to 1.96 in 2018, then rising to 2.13 in 2020 and again moderating to 1.99 in 2021. In contrast, the adjusted financial leverage ratio was consistently higher than the reported ratio, moving from 2.18 in 2017 to a peak of 2.27 in 2020 before declining to 2.06 in 2021. The consistent spread between reported and adjusted leverage ratios highlights the impact of goodwill on the leverage calculation, indicating that excluding goodwill results in a higher leverage measure.

Overall, the data indicate strong asset and equity growth, with financial leverage showing moderate variation but no extreme fluctuations. The adjustments for goodwill notably affect both total asset and equity values, leading to slightly higher leverage ratios when goodwill is excluded, which may reflect a more conservative assessment of financial risk.

The equity of the company, both reported and goodwill adjusted, exhibited a consistent upward trajectory over the five-year period under review. Reported total equity increased from approximately 3.35 billion USD at the end of 2017 to about 6.30 billion USD by the end of 2021. Similarly, the adjusted total equity rose from roughly 2.96 billion USD in 2017 to approximately 5.85 billion USD in 2021. This indicates a strong growth in equity base irrespective of goodwill adjustments.

Return on equity (ROE), both reported and adjusted, showed more variability during the period. The reported ROE started at 24.25% in 2017, peaked at 31.98% in 2018, and then experienced a declining trend through 2019 and 2020, reaching a low of 12.68%. However, there was a substantial recovery and sharp increase in 2021, with reported ROE soaring to nearly 51%. Adjusted ROE followed a similar pattern, starting at 27.41% in 2017, peaking at 35.90% in 2018, declining to 14.17% in 2020, and then sharply rising to 54.93% in 2021.

The adjusted ROE values are consistently higher than the reported ROE values in each year, which suggests that goodwill adjustments positively influence the measurement of profitability relative to equity.

Equity Trends

The steady increase in reported and adjusted equity indicates robust capital growth, suggesting effective retention of earnings or capital injections over the periods.

The narrowing gap between reported and adjusted equity in the earlier years widens significantly by 2021, signaling an increase in goodwill or intangible assets impacting reported equity.

Return on Equity Trends

The peak ROE in 2018 followed by a decline through 2020 indicates possible operational or market challenges affecting profitability or equity utilization during this timeframe.

The pronounced rebound in 2021 with ROE values exceeding 50% reflects a remarkable enhancement in profitability or more efficient equity deployment in that year.

The consistently higher adjusted ROE suggests that excluding goodwill enhances the perceived profitability performance relative to equity.

Total Assets

Reported total assets exhibit a consistent upward trend over the five-year period, increasing from $6.86 billion in 2017 to $12.53 billion in 2021. The adjusted total assets follow a similar trajectory, growing from approximately $6.47 billion in 2017 to $12.08 billion in 2021. Both measures show notable growth, particularly between 2020 and 2021, indicating expansion in asset base.

Return on Assets (ROA)

Reported ROA experiences fluctuations during the period. Initially, ROA increases from 11.85% in 2017 to a peak of 16.34% in 2018, followed by a substantial decline to 8.11% in 2019 and further decrease to 5.94% in 2020. A significant rebound occurs in 2021, with reported ROA reaching a high of 25.65%, surpassing all previous years.

Adjusted ROA mirrors the pattern observed in reported ROA, starting at 12.56% in 2017 and rising to 17.30% in 2018. Similar declines occur in 2019 and 2020, falling to 8.58% and 6.25%, respectively. In 2021, adjusted ROA sharply increases to 26.61%, slightly higher than reported ROA for the same year. This indicates that adjustments, likely related to goodwill, slightly improve the perceived profitability of the assets.

Insights

The asset base’s steady growth suggests ongoing investment and expansion activities. The volatility in ROA, particularly the decline in 2019 and 2020 followed by a marked recovery in 2021, could reflect variations in earnings performance or economic conditions during those years. The higher adjusted ROA compared to reported ROA across all years highlights the effect of asset adjustments in providing a slightly more favorable view of asset profitability. The sharp increase in both ROA metrics in 2021 may indicate improved operational efficiency or exceptional performance in that year.