Walgreens Boots Alliance Inc. (NASDAQ:WBA)

Return on Assets (ROA)

The Return on Assets displayed variability over the six-year period. Beginning at 5.2% in 2014, it increased to a peak of 7.37% in 2018 before declining to 5.89% in 2019. This indicates an overall positive performance trend with a peak efficiency in asset utilization in 2018, followed by a decrease in the most recent year.

Financial Leverage

Financial leverage showed a consistent upward trend throughout the analyzed period. Starting at a ratio of 1.82 in 2014, it escalated steadily to 2.88 in 2019. This increasing leverage suggests a growing reliance on debt financing over equity, indicating a more aggressive capital structure approach over time.

Return on Equity (ROE)

Return on Equity rose significantly from 9.44% in 2014 to a high of 19.32% in 2018, demonstrating an improvement in the company’s ability to generate profits from shareholders' equity. However, there was a subsequent decrease to 16.94% in 2019, reflecting some decline in equity profitability but still maintaining levels above earlier years.

Net Profit Margin

The net profit margin exhibited a generally fluctuating trend over the observed period. Starting at 2.53% in 2014, it increased sharply to 4.08% in 2015, followed by a slight decline to 3.56% in 2016 and further decreases to 3.45% in 2017. The margin then improved to 3.82% in 2018 before falling again to 2.91% in 2019. This indicates variability in profitability relative to sales, with no sustained upward or downward trajectory across the years.

Asset Turnover

Asset turnover showed an initial decline from 2.05 in 2014 to 1.50 in 2015, suggesting reduced efficiency in using assets to generate revenue during that period. Subsequently, there was a consistent improvement from 1.50 in 2015 to 2.02 in 2019, reflecting an increased capacity to generate sales from assets over time.

Financial Leverage

Financial leverage demonstrated a steady upward movement across the years. From 1.82 in 2014, it increased progressively to 2.88 by 2019. This consistent rise suggests the company increasingly relied on debt or other liabilities relative to equity to finance its assets during this timeframe.

Return on Equity (ROE)

ROE showed an overall positive trend with some fluctuations. Beginning at 9.44% in 2014, it rose significantly to 13.67% in 2015 and continued to increase marginally to 14.85% by 2017. The peak was observed in 2018 at 19.32%, followed by a decline to 16.94% in 2019. Despite the recent decrease, ROE remained substantially higher in later years compared to the initial value, indicating enhanced profitability for shareholders, likely influenced by both improved asset efficiency and higher leverage.

Tax Burden

The tax burden ratio shows an overall increasing trend from 0.56 in 2014 to 0.87 in 2019. This indicates a gradual reduction in the effective tax expense relative to pre-tax income, suggesting improved tax efficiency or favorable tax conditions over the analyzed period.

Interest Burden

The interest burden ratio decreased from 0.96 in 2014 to 0.87 in 2019, with small fluctuations in between. The decline suggests an increasing proportion of earnings being absorbed by interest expenses, which may reflect elevated borrowing costs or higher debt levels.

EBIT Margin

The EBIT margin experienced fluctuations, reaching a peak of 5.69% in 2015 before generally declining to 3.85% in 2019. This downward trend towards the end of the period implies reduced operating profitability relative to revenues, potentially due to rising costs or pricing pressures.

Asset Turnover

Asset turnover improved significantly, starting at 2.05 in 2014, dropping to a low of 1.5 in 2015, and then steadily increasing to 2.02 in 2019. This suggests enhanced efficiency in using assets to generate revenues, reflecting better operational performance or asset management after an initial dip.

Financial Leverage

Financial leverage steadily increased from 1.82 in 2014 to 2.88 in 2019. This upward trend indicates the company has progressively increased its use of debt financing relative to equity, which could heighten financial risk but also potentially amplify returns.

Return on Equity (ROE)

ROE rose from 9.44% in 2014 to a peak of 19.32% in 2018 before falling to 16.94% in 2019. The general upward trend reflects improved profitability and effective use of equity capital, although the slight decline in the final year suggests some contraction in overall return generation.

The analysis of the financial data reveals several important trends over the six-year period from 2014 to 2019.

Net Profit Margin (%)

The net profit margin showed variability during the period. It exhibited a notable increase from 2.53% in 2014 to a peak of 4.08% in 2015. Subsequently, it fluctuated slightly, decreasing to 3.56% in 2016 and 3.45% in 2017. It rebounded to 3.82% in 2018 before declining again to 2.91% in 2019. Overall, the margin demonstrated a modest upward trend initially, followed by fluctuations and a downward adjustment toward the end of the period.

Asset Turnover (ratio)

Asset turnover showed a declining trend from 2.05 in 2014 to 1.5 in 2015, indicating reduced efficiency in generating sales from assets. However, this trend reversed in subsequent years, with an increase to 1.61 in 2016, 1.79 in 2017, 1.93 in 2018, and reaching 2.02 in 2019. This suggests a steady improvement in asset utilization efficiency after the initial decline.

Return on Assets (ROA) (%)

ROA increased from 5.2% in 2014 to 6.14% in 2015, reflecting improved profitability relative to asset base. While there was a slight decline to 5.74% in 2016, the ratio generally climbed over the next two years, hitting 6.18% in 2017 and peaking at 7.37% in 2018. In 2019, ROA declined to 5.89%, indicating some reduction in asset profitability but still remaining above the initial 2014 level. Overall, ROA shows an upward trend with some fluctuations.

In summary, the company's profitability measures exhibited some volatility over the period. Despite fluctuations in net profit margin and ROA, the latter showed a general upward trend suggesting improving asset profitability until 2018, followed by a slight decline. Asset turnover experienced an initial drop but improved significantly in later years, pointing to enhanced operational efficiency. These trends indicate a mixed but generally improving performance with caution warranted due to recent declines in profitability metrics.

Tax Burden

The tax burden ratio increased steadily over the six-year period, rising from 0.56 in 2014 to 0.87 in 2019. This indicates a growing proportion of earnings retained after tax, which could reflect improved tax efficiency or changes in tax regulations benefiting the company.

Interest Burden

The interest burden ratio showed a declining trend from 0.96 in 2014 to 0.87 in 2019, with minor fluctuations. This suggests a gradual increase in interest expenses relative to operating profit, potentially indicating higher debt levels or increased borrowing costs over time.

EBIT Margin

The EBIT margin experienced variability, peaking at 5.69% in 2015 before generally declining to 3.85% in 2019. This downward trend, particularly the decrease in the last two years, points to a reduction in operating profitability, possibly due to rising costs or competitive pressures.

Asset Turnover

Asset turnover initially decreased from 2.05 in 2014 to 1.5 in 2015, then gradually recovered to 2.02 by 2019. This recovery suggests improved efficiency in using assets to generate sales, reflecting operational improvements or changes in asset management.

Return on Assets (ROA)

ROA fluctuated throughout the period, increasing from 5.2% in 2014 to a peak of 7.37% in 2018, followed by a decline to 5.89% in 2019. This pattern indicates that despite some operational challenges, overall asset profitability improved before moderating in the final year.

The analysis of the presented financial ratios over the six-year period reveals several noteworthy trends in the company's profitability and financial burden metrics.

Tax Burden

The tax burden ratio increased steadily from 0.56 in 2014 to 0.87 in 2019. This upward trend indicates that a progressively larger portion of pre-tax earnings is retained after taxes over the years, suggesting improved tax efficiency or favorable changes in the tax environment impacting the company.

Interest Burden

The interest burden ratio demonstrated a slight downward trend, declining from 0.96 in 2014 to 0.87 in 2019, with minor fluctuations during the intermediate years. This suggests that the company experienced a modest increase in interest expense relative to earnings before interest and taxes, possibly reflecting higher debt levels or less favorable borrowing costs.

EBIT Margin

The EBIT margin showed variability, peaking at 5.69% in 2015 before gradually declining to 3.85% in 2019. After a high point in 2015, the margin diminished, indicating pressure on operating profitability, which may be attributable to increased operating costs, competitive pressures, or changes in revenue mix.

Net Profit Margin

The net profit margin closely mirrored the movements seen in EBIT margin, rising from 2.53% in 2014 to a peak of 4.08% in 2015, then slowly declining to 2.91% by 2019. Although profitability improved initially, the subsequent decline suggests challenges in maintaining bottom-line growth, potentially due to rising costs, interest expenses, or lower operational efficiencies.

In summary, while the company achieved improved tax efficiency as reflected in the rising tax burden ratio, its interest expenses appeared to exert increasing pressure. Profitability metrics, both at the operating and net levels, peaked mid-period before declining towards 2019, indicating emerging headwinds impacting earnings quality and sustainability.