Trade Desk Inc. (NASDAQ:TTD)

The financial data reveals notable fluctuations in the profitability and leverage metrics over the five-year period ending December 31, 2024.

Return on Assets (ROA)

The return on assets shows a declining trend from 8.8% in 2020 to a low of 1.22% in 2022. This suggests a decrease in the company's efficiency in generating profit from its asset base during this period. However, there is a recovery observed in the subsequent years, with ROA increasing to 3.66% in 2023 and reaching 6.43% in 2024. This rebound indicates an improvement in asset utilization and profitability towards the end of the observed timeframe.

Financial Leverage

Financial leverage ratios demonstrate a gradual decrease overall, falling from 2.72 in 2020 to 2.07 in 2024. The decline indicates a reduction in the company’s reliance on debt relative to equity over the years. Minor fluctuations occur, such as a slight increase to 2.26 in 2023, but the general trend points to a steady decrease in leverage, potentially reflecting a strategic shift towards a more conservative capital structure.

Return on Equity (ROE)

Return on equity exhibits a pattern similar to ROA, with a marked decline from a high of 23.92% in 2020 to 2.52% in 2022. This indicates a significant reduction in profitability from shareholders' investments during this period. Subsequently, ROE improves notably to 8.27% in 2023 and further to 13.33% in 2024. The improvement may suggest enhanced profitability or operational efficiency translating into better returns for equity holders after the 2022 trough.

Overall, the data illustrates a period of declining profitability between 2020 and 2022, followed by recovery through 2023 and 2024. The steady decline in financial leverage over the period may have contributed to improved stability and profitability in the recent years. These trends suggest a potential phase of restructuring or strategic realignment, aimed at strengthening financial performance and reducing risk exposure.

Net Profit Margin

The net profit margin exhibits a significant decline from 28.98% in 2020 to a low of 3.38% in 2022, indicating a substantial reduction in profitability relative to revenue. After 2022, there is a recovery trend, with margins increasing to 9.19% in 2023 and further to 16.08% in 2024, although not reaching the peak levels observed in 2020.

Asset Turnover

Asset turnover shows a steady upward trend over the observed period. Starting at 0.3 in 2020, it increases incrementally each year to reach 0.4 by 2023 and remains stable at 0.4 in 2024. This suggests improved efficiency in using assets to generate sales over time.

Financial Leverage

Financial leverage decreases from 2.72 in 2020 to 2.07 in 2022 and again in 2024, with a slight uptick to 2.26 in 2023. The overall trend indicates a reduction in the use of debt relative to equity, implying potential efforts to strengthen the capital structure and reduce financial risk.

Return on Equity (ROE)

Return on equity follows a pattern similar to net profit margin, declining sharply from 23.92% in 2020 to 2.52% in 2022. Following this trough, ROE improves to 8.27% in 2023 and further climbs to 13.33% in 2024. Despite this recovery, ROE remains below the initial level from 2020, reflecting ongoing challenges in generating returns for equity holders.

The analysis of the financial ratios over the five-year period reveals several noteworthy trends and shifts in the company’s financial performance and efficiency.

Tax Burden (ratio)

The tax burden ratio shows a significant decline from 1.68 in 2020 to a low of 0.42 in 2022, followed by a partial recovery to 0.77 by 2024. This suggests fluctuations in effective tax rates or tax-related impacts on net profitability, with the lowest tax burden observed in 2022.

Interest Burden (ratio)

The interest burden remains relatively stable around 1 throughout the period, indicating consistent interest expense levels relative to earnings before interest and taxes (EBIT). Minor variations suggest manageable interest costs and stable debt servicing.

EBIT Margin (%)

The EBIT margin experiences a decline from 17.21% in 2020 to its lowest point at 8.33% in 2022, then rebounds notably to reach 20.81% by 2024. This trend signals a reduction in operating profitability during the middle years followed by a robust improvement in operational efficiency or revenue generation relative to operating costs.

Asset Turnover (ratio)

Asset turnover shows a steady increase from 0.30 in 2020 to 0.40 by 2023, maintaining that level through 2024. This gradual improvement implies enhanced efficiency in utilizing assets to generate sales over time.

Financial Leverage (ratio)

Financial leverage decreases from 2.72 in 2020 to 2.07 in 2022, increases slightly to 2.26 in 2023, and then returns to 2.07 in 2024. Overall, this indicates a reduction in reliance on debt or financial obligations relative to equity, with some fluctuations reflecting changes in the capital structure.

Return on Equity (ROE) (%)

ROE drops sharply from 23.92% in 2020 to a low of 2.52% in 2022, recovering to 13.33% by 2024. The initial decline corresponds with reduced profitability and possibly less efficient capital use, whereas the subsequent recovery aligns with improvements in EBIT margin and asset turnover, indicating enhanced overall profitability and shareholder value creation.

In summary, the data illustrate a period marked by declining profitability and returns through 2022, accompanied by reduced financial leverage and stable interest burden. After 2022, the company demonstrates significant recovery in profitability and efficiency metrics, improving EBIT margin, asset turnover, and ROE, while maintaining conservative leverage levels. These patterns suggest a strategic focus on operational improvement and financial prudence contributing to strengthened financial performance in the most recent years.

Net Profit Margin

The net profit margin experienced a significant decline from 28.98% in 2020 to 3.38% in 2022, indicating a considerable reduction in profitability relative to sales. However, from 2022 onwards, there was a recovery trend with the margin rising to 9.19% in 2023 and further improving to 16.08% by 2024, suggesting a partial restoration of profit efficiency.

Asset Turnover

Asset turnover showed a steady and consistent increase over the five-year period, starting at 0.3 in 2020 and reaching 0.4 by 2023, maintaining that level into 2024. This upward trend indicates improving efficiency in utilizing assets to generate sales, reflecting more effective asset management over time.

Return on Assets (ROA)

ROA mirrored the pattern observed in net profit margin, with a sharp decline from 8.8% in 2020 to just 1.22% in 2022, highlighting a reduced ability to convert assets into net earnings during that period. Subsequently, ROA improved to 3.66% in 2023 and further increased to 6.43% in 2024, indicating a gradual recovery in asset profitability, although not reaching the initial 2020 level.

Tax Burden

The tax burden ratio exhibits a notable declining trend from 1.68 in 2020 to 0.42 in 2022, indicating a reduced tax impact on earnings during this period. Subsequently, it rises gradually to 0.77 by 2024, suggesting a partial recovery or increase in tax expenses relative to income after the low point in 2022.

Interest Burden

The interest burden ratio remains remarkably stable around 1 throughout the entire period from 2020 to 2024. This consistency implies minimal changes in the company’s interest expenses and that interest costs have a negligible effect on operating income across these years.

EBIT Margin

The EBIT margin shows an initial decline from 17.21% in 2020 to 8.33% in 2022, reflecting diminished operating profitability. However, following 2022, the margin improves significantly to 13.86% in 2023 and further to 20.81% in 2024, indicating enhanced operational efficiency or improved cost management leading to stronger earnings before interest and taxes.

Asset Turnover

Asset turnover ratio demonstrates a consistent upward trend from 0.3 in 2020 to 0.4 by 2023 and remains stable at 0.4 through 2024. This trend suggests increased efficiency in utilizing assets to generate revenue over time.

Return on Assets (ROA)

ROA declines sharply from 8.8% in 2020 to 1.22% in 2022, marking a significant reduction in overall asset profitability. After 2022, ROA begins to recover, rising to 6.43% by 2024, although it does not reach the initial level observed in 2020. This pattern indicates a period of strain in asset returns followed by a phase of recovery.

Tax Burden

The Tax Burden ratio shows a significant declining trend from 1.68 in 2020 to a low of 0.42 in 2022, indicating a reduction in tax expenses relative to earnings before taxes during that period. Following this trough, there is a partial recovery with the ratio increasing to 0.67 in 2023 and 0.77 in 2024, suggesting a modest increase in tax burden compared to the previous low.

Interest Burden

The Interest Burden ratio remains relatively stable and close to 1 throughout the five-year period. Slight decreases are seen in 2021 and 2022, reaching 0.97 in 2022, before returning to 1 by 2024. This stability indicates minimal impact from interest expenses on earnings before interest and taxes over time.

EBIT Margin

The EBIT Margin demonstrates a downward trend from 17.21% in 2020 to 8.33% in 2022, reflecting a reduction in operating profitability during this timeframe. Notably, the margin recovers in the following years, rising to 13.86% in 2023 and reaching 20.81% in 2024, exceeding the initial level in 2020. This pattern suggests an improvement in operational efficiency or revenue quality in the more recent periods.

Net Profit Margin

Net Profit Margin declines sharply from 28.98% in 2020 to a low of 3.38% in 2022, indicating a substantial compression of the company’s bottom-line profitability. A gradual recovery follows, with margins improving to 9.19% in 2023 and further to 16.08% in 2024. Despite the recovery, the margin in 2024 remains below the level observed in 2020, pointing to ongoing challenges to achieve previous profitability levels fully.