Steel Dynamics Inc. (NASDAQ:STLD)

The financial data reveals several important trends regarding profitability, capital efficiency, and value creation over the analyzed periods.

Net Operating Profit After Taxes (NOPAT)

NOPAT initially increased sharply from 755,373 thousand US dollars in 2017 to 1,420,457 thousand in 2018. However, it then declined substantially to 827,375 thousand in 2019 and decreased further to 696,079 thousand in 2020. In 2021, a significant rebound occurred, with NOPAT reaching 3,611,424 thousand US dollars, the highest level in the series. This indicates fluctuating operational profitability with a strong recovery in the final year.

Cost of Capital

The cost of capital remained relatively stable, fluctuating modestly between 14.15% and 16.53%. It declined from 16.53% in 2017 to the lowest point of 14.15% in 2019, then increased again to approximately 16.11% by 2021. This suggests a stable but slightly fluctuating required return on investment over time.

Invested Capital

Invested capital showed a consistent upward trend throughout the period, increasing from 5,964,900 thousand US dollars in 2017 to 8,550,168 thousand in 2021. The annual increases were steady, indicating continuous reinvestment or growth in the asset base supporting operations.

Economic Profit

Economic profit, which measures value creation after accounting for the cost of capital, was negative in three of the five years analyzed, indicating periods where returns did not exceed capital costs. Specifically, it was negative in 2017 (-230,675 thousand), 2019 (-124,076 thousand), and 2020 (-313,249 thousand). Positive economic profits were achieved in 2018 (393,434 thousand) and substantially improved in 2021 to 2,234,152 thousand. The sharp increase in 2021 aligns with the strong increase in NOPAT and appears to signal enhanced operational efficiency or profitability exceeding capital costs in that year.

Overall, the data reflects a company experiencing variable operational performance and value creation from 2017 to 2020, followed by a robust improvement in 2021. This improvement is characterized by a notable increase in profitability and economic profit despite a higher invested capital and a marginally increased cost of capital. The trends suggest an emphasis on growth and enhanced financial performance in the most recent year evaluated.

Net income attributable to Steel Dynamics, Inc.

The net income shows a volatile trend over the period analyzed. It increased significantly from 812,741 thousand USD in 2017 to a peak of 1,258,379 thousand USD in 2018. However, this was followed by a sharp decline to 671,103 thousand USD in 2019 and a further decrease to 550,822 thousand USD in 2020. In 2021, net income experienced a remarkable surge, reaching 3,214,066 thousand USD, the highest level in the five-year span.

Net operating profit after taxes (NOPAT)

The NOPAT values exhibit a similar pattern to net income, indicating operational profitability dynamics. Starting at 755,373 thousand USD in 2017, NOPAT rose substantially to 1,420,457 thousand USD in 2018. Subsequently, it experienced a decline, reaching 827,375 thousand USD in 2019 and decreasing slightly to 696,079 thousand USD in 2020. In 2021, NOPAT showed a significant increase to 3,611,424 thousand USD, surpassing prior years and indicating improved operational efficiency or favorable business conditions.

Insights

Both net income and NOPAT demonstrate a pattern of considerable increase in 2018, followed by a decline over the next two years, and then a substantial recovery in 2021. The pronounced increases in 2021 suggest that the company may have benefited from external or internal factors that significantly enhanced profitability. However, the volatility in prior years highlights potential operational challenges or market fluctuations impacting earnings. The alignment between net income and NOPAT trends suggests that both operational performance and overall profitability were similarly affected throughout the period.

Income tax expense

The income tax expense exhibited significant fluctuation over the five-year period. Starting at approximately $129 million in 2017, it sharply increased to nearly $364 million in 2018. This was followed by a marked reduction to about $197 million in 2019 and further declined to approximately $135 million in 2020. However, in 2021, there was a dramatic spike to over $962 million, representing the highest value in the observed timeframe.

Cash operating taxes

Cash operating taxes showed a different pattern compared to the income tax expense. Initially, there was a moderate rise from roughly $317 million in 2017 to $332 million in 2018. This was succeeded by a substantial decrease to about $176 million in 2019, continuing downward to $110 million in 2020. In 2021, cash operating taxes reversed the downward trend, surging significantly to around $656 million, though still below the 2017 and 2018 levels.

Comparison and analysis

Both income tax expense and cash operating taxes experienced fluctuations with a notable peak in 2021. Income tax expense showed more volatility with its lowest value in 2017 and highest in 2021, while cash operating taxes maintained a relatively higher baseline in the earlier years before a marked decline and subsequent increase in 2021. The considerable rise in both metrics in 2021 might indicate higher taxable income or changes in tax policy or company financial structure. The differing trajectories from 2017 to 2020 between the two measures suggest variations in timing or recognition of tax-related cash flows versus accrued tax expenses.

Total reported debt & leases

The total reported debt and leases show a generally increasing trend over the analyzed period. Starting at approximately 2.43 billion USD in 2017, the figure rose steadily each year up to around 3.21 billion USD by the end of 2021. This indicates a growing leverage or financing through debt and lease obligations over time.

Total Steel Dynamics, Inc. equity

Equity values exhibit consistent growth throughout the five-year span. Beginning at approximately 3.35 billion USD in 2017, equity increased to about 6.30 billion USD by 2021, with a notable acceleration between 2020 and 2021. This substantial rise in equity suggests significant retained earnings, capital infusions, or revaluation impacts that strengthened the company’s equity base.

Invested capital

Invested capital experienced steady growth from 5.96 billion USD in 2017 to 8.55 billion USD in 2021. The increase is somewhat consistent year over year, with a marked jump in the final year analyzed. This growth reflects an expansion in the total capital allocated in the business, combining both debt and equity financing sources, which supports the company’s operational capacity and potential for value creation.

Overall trend and insights

The data reveals a balanced expansion financed through both higher liabilities and substantially increased equity, leading to larger invested capital over the five years. The proportionally higher increase in equity compared to debt may indicate a strategic emphasis on strengthening the financial position and reducing financial risk. The rising invested capital underscores ongoing investments in operational assets or business growth initiatives. Such trends typically reflect robust financial health and an upward trajectory in the company’s scale and capital structure sophistication.

Economic Profit Trends

The economic profit exhibits significant volatility over the five-year span. Starting with a negative value of -230,675 thousand US dollars in 2017, it improved markedly to a positive 393,434 thousand in 2018. However, it then declined again to negative territory in both 2019 (-124,076 thousand) and 2020 (-313,249 thousand). A substantial recovery occurs in 2021, with economic profit reaching a peak of 2,234,152 thousand US dollars, indicating a strong profitability turnaround by the end of the period analyzed.

Invested Capital Trends

Invested capital displays a consistent upward trend throughout the period. Beginning at 5,964,900 thousand US dollars in 2017, it gradually increased each year, reaching 8,550,168 thousand US dollars by 2021. This steady growth suggests ongoing investment in assets or operations, which may reflect expansion or capital intensification initiatives.

Economic Spread Ratio Trends

The economic spread ratio fluctuates considerably, mirroring the volatility observed in economic profit. It started at a negative 3.87% in 2017, turned positive to 6.14% in 2018, and then reverted to negative values in 2019 (-1.85%) and 2020 (-4.62%). The ratio experiences a pronounced improvement in 2021, surging to 26.13%, which corresponds with the notable increase in economic profit that year. This substantial positive spread indicates improved returns over the cost of capital during the final year analyzed.

Overall Observations

The data reveal a cyclical pattern in profitability measures with a marked recovery in 2021 after periods of negative returns. The consistent growth in invested capital throughout the period suggests sustained asset accumulation, while the sharp rise in economic profit and spread ratio in 2021 indicates enhanced efficiency or market conditions leading to superior economic performance. The substantial 2021 improvements may warrant further analysis to identify the driving factors behind the positive turnaround.

Over the analyzed period, several notable trends emerge in the financial performance as measured by net sales, economic profit, and economic profit margin.

Net Sales

Net sales experienced fluctuations, with an overall upward movement across the years. Beginning at approximately 9.54 billion US dollars in 2017, sales increased to about 11.82 billion in 2018, then declined somewhat in 2019 and 2020 to roughly 10.46 billion and 9.60 billion respectively. A marked recovery and substantial growth occurred in 2021, reaching approximately 18.41 billion, which represents the highest sales figure in the period under review.

Economic Profit

The economic profit figures exhibited high volatility. In 2017, the company recorded a significant economic loss of around 231 million US dollars. This improved dramatically in 2018 to a positive economic profit of approximately 393 million. However, losses returned in the subsequent two years, with negative values around 124 million in 2019 and 313 million in 2020, indicating challenges in generating returns above the cost of capital during these years. A pronounced turnaround is evident in 2021, where economic profit surged to over 2.23 billion US dollars, signaling a strong period of value creation.

Economic Profit Margin

The economic profit margin, which expresses economic profit as a percentage of net sales, followed a pattern consistent with the absolute economic profit fluctuations. Negative margins were observed in 2017 (-2.42%) and 2019 (-1.19%), with the lowest margin in 2020 at -3.26%. Positive margins were recorded in 2018 (3.33%) and notably in 2021 (12.14%). The sharp increase in 2021 reflects improved profitability and effective utilization of sales to generate economic value.

In summary, after varying performance with periods of losses and gains, the final year shows substantial improvement across all metrics, particularly in economic profit and margin, correlating with a significant rise in net sales. This suggests that the company successfully enhanced operational efficiency or capital allocation in 2021, resulting in strong financial returns.