Super Micro Computer Inc. (NASDAQ:SMCI)

The financial indicators reveal notable trends over the analyzed periods. Return on Assets (ROA) initially remains relatively stable, fluctuating around 4.5% to 5% through mid-2021. Following this period, a marked upward trend is observed, with ROA increasing steadily to a peak above 18% at the end of 2022 and early 2023. Subsequently, the ROA demonstrates a gradual decline, tapering to approximately 5.5% by the third quarter of 2025.

Financial leverage exhibits a generally increasing trend from late 2020 through early 2022, rising from approximately 1.69 to a peak near 2.41. After this peak, financial leverage declines, reaching around 1.69 at the close of 2022. From 2023 onwards, leverage fluctuates moderately between 1.56 and 2.22, indicating some variability but overall a slightly declining or stabilizing pattern as it approaches late 2025.

Return on Equity (ROE) follows a similar trajectory to ROA, with moderate values near 8-10% during 2020 and early 2021. A substantial increase occurs from mid-2021 into late 2022, with ROE reaching above 33%. Subsequently, ROE decreases progressively, ending near 12% by the third quarter of 2025. The ROE values are consistently higher than ROA, reflecting the influence of financial leverage on equity returns.

Return on Assets (ROA)

Stable near 4.5%-5% until mid-2021, then a significant rise to over 18% by late 2022 and early 2023, followed by a gradual decline to around 5.5% by late 2025.

Financial Leverage

Increasing trend from 1.69 to 2.41 up to early 2022, then decreasing and fluctuating between 1.56 and 2.22 through late 2025.

Return on Equity (ROE)

Moderate around 8-10% in early periods, sharp increase peaking above 33% at the end of 2022, followed by a decreasing trend to approximately 12% by late 2025.

In summary, the company experienced a period of improving asset efficiency and equity profitability, reflecting increased earnings performance and effective use of assets. However, this strong performance peaked around late 2022 and was followed by a decline in profitability measures toward 2025. The interplay between financial leverage and returns indicates that changes in leverage contributed to amplification of equity returns during the upward phase and may have moderated returns during the decline. The overall pattern suggests a cycle of growth in profitability followed by a moderation phase, which may warrant further analysis of underlying operational or market conditions affecting these financial metrics.

The analysis of key financial ratios over the periods presented reveals notable trends in profitability, efficiency, leverage, and overall return to shareholders.

Net Profit Margin

The net profit margin shows an initial steady increase from 2.56% in September 2020 to a peak of 8.98% in June 2023. Following this peak, there is a gradual decline to 3.77% by September 2025. This indicates an improvement in profitability up to mid-2023, after which profit margins have narrowed, suggesting either increased costs, pricing pressure, or other factors affecting profitability.

Asset Turnover

Asset turnover demonstrates some volatility, starting at 1.82 in September 2020 and declining to a low of 1.33 in March 2024. After this period, there is a recovery reaching 2.14 in March 2025 before a decrease again to 1.46 by September 2025. This pattern signifies fluctuations in how efficiently the company uses its assets to generate sales, with notable efficiency improvements in early 2025, but a subsequent decrease towards the end.

Financial Leverage

Financial leverage steadily increases from 1.69 in September 2020 to a high of 2.41 in March 2022, implying progressively greater use of debt relative to equity during that time. This is followed by a decline to around 1.56 in March 2025, then rising again to 2.21 by September 2025. The fluctuation in leverage indicates changing capital structure strategies, with periods of both deleveraging and increased debt levels.

Return on Equity (ROE)

ROE shows strong growth from 7.88% in September 2020 to a peak of 33.21% in March 2023, reflecting a significant enhancement in shareholder returns. Subsequent to this peak, ROE decreases to 12.15% by March 2025, signaling a reduction in profitability and efficiency in generating returns on equity. This movement closely mirrors the patterns seen in net profit margin and asset turnover, suggesting interconnected drivers.

Overall, the company experienced improving profitability and return measures through early 2023, supported by asset use and leverage increases. However, following these peaks, there is a discernible downward trend in key metrics, possibly indicating emerging challenges in maintaining profitability, operational efficiency, or capital management in the later periods.

The financial data for the company reveals several notable trends over the analyzed periods.

Tax Burden Ratio

The tax burden ratio generally declined from above 1.00 in late 2020 to a range between approximately 0.83 and 0.92 in subsequent years, indicating a relative decrease in tax impact on pre-tax earnings. This slight downward shift stabilizes around 0.85 to 0.92 with modest fluctuations toward the later periods.

Interest Burden Ratio

The interest burden remained relatively stable and close to 0.97-0.99 for most of the duration, reflecting consistent management of interest expenses relative to earnings before interest and taxes. However, a minor decline is observed starting around early 2024, moving gradually down to 0.93 by mid-2025, suggesting a slight increase in interest expenses or higher leverage costs.

EBIT Margin

The EBIT margin exhibited a strong upward trend from under 3% in late 2020 to a peak exceeding 10% around the end of 2022 and early 2023, signaling enhanced operational profitability. Post-peak, a gradual decrease is observed through 2024 and mid-2025, declining to below 5%, indicating pressure on earnings from operations during the most recent periods.

Asset Turnover

Asset turnover ratios showed a fluctuating pattern with a general range between approximately 1.3 and 2.1. After an initial gradual decline during 2020 to mid-2021, asset turnover rebounded strongly towards late 2022, peaking above 2.1, then experienced volatility through the later periods with declines below 1.5 by late 2025, which may reflect varying efficiency in asset utilization over time.

Financial Leverage

Financial leverage increased steadily from around 1.69 in late 2020 to a peak above 2.4 by early 2022, demonstrating greater use of debt relative to equity. Subsequently, leverage declined notably to below 1.7 by late 2022, followed by fluctuations and a rise again above 2.2 in mid-2025, implying cycles of debt accumulation and reduction over the period.

Return on Equity (ROE)

ROE showed a strong growth trend from roughly 8% in late 2020 to a peak exceeding 33% at the end of 2022, reflecting significant improvement in shareholder returns. However, after this peak, ROE declined in a downward trajectory, dropping to around 12% by mid-2025, though still above initial levels, indicating some challenges in sustaining high profitability for equity holders in recent periods.

Overall, the company demonstrated a substantial improvement in operating profitability and return on equity through 2022, supported by high asset turnover and increased financial leverage. However, profitability and efficiency metrics have shown signs of deterioration since early 2023, with EBIT margins, asset turnover, and ROE trending downward, potentially signaling emerging operational or market challenges. The consistent tax and interest burden ratios suggest stable tax and interest expense management, though recent minor increases in interest impact may warrant monitoring.

The analysis of the quarterly financial ratios reveals distinct patterns and fluctuations over the observed periods.

Net Profit Margin

The net profit margin exhibits an overall upward trend from 2.56% in September 2020, reaching a peak at 8.98% in June 2023. After this peak, the margin begins to decline gradually, falling to 3.77% by September 2025. This indicates that profitability improved steadily for several years before experiencing a significant decrease towards the end of the period.

Asset Turnover

Asset turnover shows variability throughout the timeframe. It starts at 1.82 in September 2020, decreases to a low point of around 1.33 in March 2024, then recovers to a high of 2.14 by March 2025, before dropping again towards 1.46 in September 2025. The fluctuating pattern suggests varying efficiency in using assets to generate sales, with a notable dip in early 2024 followed by a recovery and another decline.

Return on Assets (ROA)

Return on assets parallels the net profit margin trend to some extent, rising from 4.65% in September 2020 to a peak of 18.81% in December 2022. Subsequently, it experiences a downward trend, decreasing to 5.51% by September 2025. This pattern indicates that the company’s ability to generate returns from its assets improved remarkably during the earlier periods but weakened considerably toward the later periods.

Overall, the company experienced improved profitability and asset efficiency during the initial years, with both net profit margin and ROA reaching high values around 2022 and mid-2023. However, there is a clear reversal of these positive trends starting in mid-2023, with declines in profitability and returns on assets. Asset turnover displayed more volatility, suggesting changing operational effectiveness in asset utilization across the periods.

Tax Burden

The tax burden ratio shows a declining trend from 1.02 in September 2020 to approximately 0.83 in September 2022, indicating a reduction in the proportion of pre-tax income lost to taxes. After this period, it stabilizes around 0.85 to 0.95 with minor fluctuations thereafter, suggesting a relatively consistent effective tax rate in recent quarters.

Interest Burden

This ratio remains relatively stable throughout the observed periods, fluctuating mildly between 0.93 and 0.99. The high values close to 1 imply limited impact of interest expenses on earnings, with a slight downward trend in the most recent quarters indicating marginally increased interest costs or changes in financing structure.

EBIT Margin

The EBIT margin demonstrates a general upward trend from 2.57% in September 2020 to a peak of about 10.69% in the first half of 2023, reflecting improving operating profitability. Post-peak, a gradual decline is observed, falling to 4.67% by September 2025, which may indicate increasing costs, competitive pressures, or changes in product mix impacting operating efficiency.

Asset Turnover

Asset turnover ratio declines from 1.82 in September 2020 to a low near 1.33 in March 2024, suggesting reduced efficiency in utilizing assets to generate sales. This is followed by a partial recovery and fluctuations, reaching values near 2.14 by March 2025 before declining again. Such volatility indicates variations in sales relative to asset base, possibly from changes in asset investment or sales velocity.

Return on Assets (ROA)

ROA exhibits an increasing trend from 4.65% in September 2020 to a high point of about 18.81% in December 2022, indicating enhanced overall profitability from asset use. Subsequently, ROA declines sharply to 5.51% by September 2025. This pattern aligns with trends in EBIT margin and asset turnover, reflecting an initial improvement in operating performance and asset utilization followed by deterioration in profitability and efficiency.

The financial ratios reveal several noteworthy trends over the analyzed quarters.

Tax Burden

The tax burden ratio displayed a gradual decline from slightly above 1.00 in late 2020 to around 0.83 by the third quarter of 2022, suggesting a decrease in effective tax rates or tax-related expenses relative to pre-tax earnings. Subsequently, it stabilized in the mid to high 0.80s range with minor fluctuations, indicating a relatively consistent tax impact on earnings thereafter.

Interest Burden

The interest burden remained relatively steady, close to 0.97 to 0.98 through late 2022, which implies consistent interest expenses relative to EBIT over that period. From late 2022 onward, a slight declining trend emerged, with the ratio decreasing to 0.93 by the third quarter of 2025, potentially reflecting rising interest expenses or lower EBIT levels affecting the company's ability to cover interest costs efficiently.

EBIT Margin

There is a clear upward trajectory in EBIT margin from 2.57% in the third quarter of 2020, rising steadily and peaking at 10.69% in early 2023, indicating substantial improvement in operating profitability during this period. After reaching this peak, the margin shows a consistent decline through mid-2025, dropping to 4.67%, which may point to increasing operating costs, pricing pressures, or other factors negatively impacting operating income as a percentage of revenue.

Net Profit Margin

The net profit margin follows a pattern similar to the EBIT margin, increasing from around 2.56% in late 2020 to nearly 8.98% in early 2023. This improvement suggests enhanced overall profitability possibly driven by operational gains, lower tax burdens, or controlled interest expenses. However, from that peak, the margin declines steadily to 3.77% by the third quarter of 2025. This decrease mirrors the trend in EBIT margin and may be influenced additionally by fluctuations in tax and interest burdens or other non-operating factors affecting net income.

In summary, the company demonstrated improving profitability from 2020 through early 2023, marked by rising EBIT and net profit margins supported by stable tax and interest expenses relative to earnings. After this period, profitability metrics declined notably through 2025, accompanied by a modest increase in effective tax impact and interest expense pressures, which collectively point to challenges in sustaining earlier performance levels.