Super Micro Computer Inc. (NASDAQ:SMCI)

The financial data reveals several notable trends related to profitability and leverage measured through Return on Assets (ROA), Return on Equity (ROE), and Financial Leverage ratios.

Return on Assets (ROA)

ROA is first reported at 4.39% in June 2020 and exhibits a steady upward trajectory, reaching a peak of 18.81% by March 2023. This pronounced growth in asset profitability indicates increasingly efficient utilization of assets to generate earnings during this period. Subsequently, ROA experiences a gradual decline, dropping to 7.48% by June 2025, suggesting a reduction in asset profitability in the later periods.

Financial Leverage

The financial leverage ratio shows some fluctuations over the periods analyzed. Starting around 1.75 in September 2019, the ratio trends upward, reaching a peak of 2.41 in March 2022, implying an increased use of debt relative to equity which might amplify returns but also financial risk. After this peak, leverage declines steadily to a low of 1.56 by December 2024, before rising again to 2.22 by June 2025. This variability reflects shifts in the company's capital structure and funding strategies over the timeframe.

Return on Equity (ROE)

ROE data begins in June 2020 at 7.91% and shows a significant increase, peaking at 33.21% in June 2023, which aligns with the rising ROA and higher leverage noted earlier. This pattern suggests the company benefited substantially from leveraged asset growth in generating shareholder returns. Following this peak, ROE declines to 16.64% by June 2025, indicating a reduction in profitability attributable to equity holders correlating with the fall in ROA and lower leverage in the later periods.

Overall, the data depict a period of improving profitability and increasing leverage through mid-2023, enhancing shareholder returns. Subsequent declines in ROA, ROE, and leverage ratios point toward a phase of conservative financial management or a downturn in operational efficiency and profitability in the following quarters.

The analyzed data reveals distinct trends across the four financial ratios over multiple quarters. These ratios include Net Profit Margin, Asset Turnover, Financial Leverage, and Return on Equity (ROE).

Net Profit Margin

The Net Profit Margin initially appears to have been missing for several early periods but is recorded from the quarter ending June 30, 2020 onwards. It shows a gradual increase from around 2.52% reaching a peak of approximately 8.98% by March 31, 2023. Following this peak, the margin exhibits a declining trend, dropping to 4.77% by September 30, 2024, indicating a reduction in profitability relative to sales over the most recent quarters.

Asset Turnover

Asset Turnover ratios also start displaying data from mid-2020 and show moderate fluctuations across the periods. Beginning near 1.74, the ratio declines to a low of 1.33 during June 30, 2024, indicating less efficient use of assets to generate revenue at that point. Subsequently, the ratio recovers somewhat, advancing to 2.14 by March 31, 2025, suggesting improved asset utilization towards the end of the timeline.

Financial Leverage

Financial Leverage shows a general upward trend from 1.75 in September 2019 to a high of 2.41 in March 2022, inferring increased use of debt financing over this period. After reaching this peak, it declines sharply to 1.56 by December 2024, followed by an increase to 2.22 in March 2025. The variations imply an initial buildup in leverage, a subsequent reduction, and another rise, signaling shifts in capital structure or balance sheet strategy during these years.

Return on Equity (ROE)

ROE values demonstrate a strong upward trajectory beginning mid-2020, rising from approximately 7.91% to a distinctive peak exceeding 33% by June 30, 2023. Thereafter, ROE declines steadily to 16.64% by March 31, 2025. The trend suggests the company experienced significant improvements in profitability and efficiency, relative to shareholder equity, followed by a moderation phase in the most recent quarters.

Overall, the data indicate that the company enhanced profitability, asset utilization, and equity returns significantly in the earlier middle periods analyzed. Nonetheless, there are signs of moderation or correction in profit margins and ROE after their peaks. Asset Turnover and Financial Leverage demonstrate more variability, suggesting adjustments in operational efficiency and financing strategy over time. These oscillations in financial ratios reflect dynamic business and financing conditions influencing performance outcomes.

The analysis of the financial ratios over the observed quarters reveals several notable trends in profitability, efficiency, and leverage.

Tax Burden

The tax burden ratio fluctuates slightly, starting near 0.97 in mid-2020, then gradually declining to a low of 0.83 around late 2022. Following this, it moderately recovers towards approximately 0.87 by mid-2025. The general pattern indicates a slight easing of tax burden in late 2021 through 2022, which stabilizes at a moderately high level in recent periods.

Interest Burden

The interest burden ratio remains remarkably stable throughout the timeline, consistently hovering just below or around 0.98, with a minor decline to about 0.95 by mid-2025. This consistent performance suggests steady management of interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin demonstrates a strong positive trend from approximately 2.68% in mid-2020 to a peak exceeding 10% in early 2023. Subsequently, the margin declines steadily over the following quarters, dropping to about 5.76% by mid-2025. This pattern suggests a period of improving operational profitability up to early 2023, followed by reduced efficiency or increased costs impacting earnings thereafter.

Asset Turnover

Asset turnover ratio shows some variability, initially decreasing from around 1.74 to a low near 1.33 by early 2024. Afterwards, there is recovery with peaks above 2.00 in early 2025, then a slight dip again by mid-2025. These fluctuations indicate changes in how effectively the company utilizes its assets to generate revenue, with a period of diminished efficiency followed by improvement and partial retreat.

Financial Leverage

Financial leverage starts at approximately 1.75 and increases steadily to a peak near 2.41 by early 2022. After this peak, it declines markedly to around 1.56 by early 2024, signifying a reduction in reliance on debt or increased equity. However, by mid-2025, leverage rises again near 2.22, reflecting renewed increased use of financial obligations or changes in capital structure.

Return on Equity (ROE)

ROE exhibits strong growth from about 7.9% in mid-2020 to an impressive peak of over 33% by early 2023. Following this peak, ROE decreases substantially through subsequent quarters, reaching roughly 16.6% by mid-2025. This trend mirrors the EBIT margin pattern, indicating that the company achieved higher returns for shareholders for a sustained period before facing pressures that reduced profitability and efficiency.

In summary, the company’s financial performance improved significantly from mid-2020 to early 2023, marked by rising EBIT margin and ROE, supported by steady interest burden and increasing leverage. After early 2023, profitability and efficiency ratios declined, while financial leverage was initially reduced and then increased again, suggesting strategic shifts in financial management and operational challenges impacting returns and asset utilization.

Net Profit Margin

The net profit margin displays a general upward trend from its initial recorded value of 2.52% around mid-2020, reaching a peak of approximately 8.98% in early 2023. Following this peak, the margin experiences a gradual decline, falling to 4.77% by late 2025. This pattern suggests an initial strengthening in profitability, followed by a tapering off in the later periods.

Asset Turnover

Asset turnover shows variability over the observed periods, starting at 1.74 in mid-2020, dipping slightly through 2021, and reaching a low near 1.33 by mid-2024. After this decline, a recovery trend appears, with values increasing to around 2.14 in early 2025 before dropping again. Overall, this indicates fluctuating efficiency in utilizing assets to generate revenue, with a notable dip mid-cycle and partial recovery toward the later dates.

Return on Assets (ROA)

Return on assets follows a pattern closely aligned with net profit margin and asset turnover. Beginning at 4.39% in mid-2020, ROA rises considerably, peaking near 18.81% in early 2023. Post-peak, ROA declines steadily to 7.48% by late 2025. This trajectory reflects the combined effects of profitability and asset efficiency, highlighting strong asset performance through early 2023 followed by a reduction in asset returns over the subsequent periods.

Tax Burden

The tax burden ratio exhibited a gradual decline from 0.97 in June 2020 to a low of 0.83 in December 2022, indicating a decreasing proportion of income paid as tax during this period. Starting in 2023, the ratio showed a mild recovery with some fluctuations, reaching approximately 0.87 by June 2025. This pattern suggests variability in tax efficiency or changing tax obligations over the analyzed quarters.

Interest Burden

The interest burden ratio remained relatively stable throughout the period, fluctuating narrowly around 0.97 to 0.99 from June 2020 until late 2023. A slight downward trend is noted starting around March 2024, with the ratio tapering to 0.95 by June 2025. This consistency suggests steady interest expense management, with only a modest increase in interest burden toward the end of the period.

EBIT Margin

The EBIT margin demonstrated a notable upward trend from 2.68% in June 2020 to a peak of approximately 10.69% by March 2023, reflecting strong improvements in operating profitability. Following this peak, a gradual decline ensued, reducing the margin to 5.76% by June 2025. This indicates that after a period of significant margin expansion, operational profitability began to contract in the latter quarters.

Asset Turnover

Asset turnover experienced fluctuations across the evaluated timeframe. Initially decreasing from 1.74 in June 2020 to a low of 1.51 by June 2021, it then improved to a high of 2.16 in March 2023. Subsequently, a decline followed, reaching 1.57 by June 2025. These shifts reflect varying efficiency in the use of assets to generate sales, with a peak in asset utilization around early 2023 before deteriorating in later quarters.

Return on Assets (ROA)

ROA showed a strong increasing trend from 4.39% in June 2020, ascending consistently to a peak of 18.81% in March 2023. This denotes marked enhancements in overall asset profitability. However, thereafter, ROA declined steadily, reaching 7.48% by June 2025. The pattern suggests that despite earlier efficiency gains and improved earnings capacity, asset returns weakened substantially in the subsequent periods.

The financial indicators demonstrate varied patterns over the reported periods. The Tax Burden ratio displays a generally declining trend from an initial value near 0.97 to lower values around 0.83 to 0.85 during the mid-periods, with a modest recovery toward 0.87 by the final periods. This suggests a reduction in the effective tax rate impacting profitability during the middle years, followed by a slight increase more recently.

The Interest Burden ratio remains relatively stable across all periods, maintaining values close to 0.97 to 0.99 throughout. This consistency indicates steady interest expense relative to earnings before interest and taxes, suggesting no significant changes in the company's leverage costs or financing structure.

The EBIT Margin shows a strong upward trend in the early to mid-periods, rising from approximately 2.68% to a peak exceeding 10%, reflecting improved operational efficiency or higher earnings from operations. However, following this peak, there is a gradual decline trending downward to around 5.76% by the latest periods, which might indicate increasing cost pressures, reduced sales prices, or other factors negatively impacting operating profitability.

The Net Profit Margin follows a similar pattern to the EBIT Margin, increasing from about 2.52% to a peak near 8.98%, indicating enhanced bottom-line profitability. Afterwards, a downward trend is observable, with margins decreasing to approximately 4.77% in the last period. This decline may reflect changes in tax burden, interest expenses, or non-operating items influencing net income.

Overall, the analysis indicates a period of operational improvement leading to peak profitability margins, followed by a phase of margin contraction. The stable interest burden ratio suggests financing costs did not contribute significantly to these changes, while variations in the tax burden ratio partially explain shifts in net profitability beyond operating results.

Tax Burden

Declined from around 0.97 to mid-0.80s before modestly rising again near 0.87.

Interest Burden

Consistent near 0.97 to 0.99, indicating stable interest expenses relative to EBIT.

EBIT Margin

Rose sharply to over 10% then gradually decreased to under 6%, suggesting fluctuating operational profitability.

Net Profit Margin

Increased strongly to nearly 9% before declining to under 5%, reflecting changes in overall profitability including tax and interest effects.