Walgreens Boots Alliance Inc. (NASDAQ:WBA)

The analyzed financial data reveals several notable trends related to return on assets (ROA), financial leverage, and return on equity (ROE) over the observed periods.

Return on Assets (ROA)

ROA data begins from May 31, 2014, showing a general upward trend initially, rising from 5.2% to a peak of 7.61% by February 28, 2019. Following this peak, ROA exhibits a noticeable decline, dropping sharply to 0.88% by May 31, 2020. Periods of stability are observed between the late 2016 to late 2018 timeframe, where ROA consistently remains around 5.7% to 6.2%. The sharp fall in early 2020 suggests significant challenges impacting asset profitability.

Financial Leverage

Financial leverage ratios show a gradual increase over time, beginning at approximately 1.75 in May 2014 and rising steadily to reach 4.17 by May 2020. This progression indicates a strategy involving increased use of debt or other liabilities relative to equity. Notably, there is an acceleration in leverage increase starting around late 2018, suggesting greater financial risk being undertaken in recent periods.

Return on Equity (ROE)

ROE trends parallel those of ROA but with more pronounced changes, likely reflecting the influence of increasing leverage. Starting from 9.44% in May 2014, ROE generally improves, peaking sharply at 20.8% in February 2019. Post-2019, a decline occurs, with ROE falling to 3.67% by May 2020. The peak corresponds to the period of highest ROA and increasing leverage, while the subsequent drop aligns with falling ROA and rising leverage, indicating reduced overall profitability for shareholders during this latter phase.

Overall, the data illustrates a period of growing profitability and increased leverage culminating around 2018-2019, followed by a sharp contraction in profitability in early 2020 despite continued leverage growth. This suggests external or operational pressures that significantly impacted asset returns and shareholder equity returns during the most recent period.

The analysis of the quarterly financial data reveals several noteworthy trends across key financial metrics over the observed periods.

Net Profit Margin

The net profit margin shows an initial increase starting from 2.53% in November 2014, reaching a peak around 4.21% in August 2014. It then generally fluctuates within the range of approximately 3% to 4%, with some minor declines and recoveries noted over subsequent quarters. The most recent quarter shows a significant drop to 0.55%, indicating a sharp decline in profitability during that period.

Asset Turnover

Asset turnover begins at 2.05 in November 2014, followed by a noticeable decline to around 1.19 by May 2015. Subsequently, it gradually improves and stabilizes somewhat between 1.5 and 2.0 across later quarters. There is a subdued recovery phase with values reaching just over 2.0 by November 2019. However, the values dip again to around 1.51–1.61 in the most recent quarters.

Financial Leverage

Financial leverage starts at 1.82 in November 2013 and exhibits an increasing trend over the entire period under review. There is a steady climb from around 2.36 in November 2014 to 2.73 by November 2018. The leverage ratio further escalates, reaching beyond 3.8 in the latest quarters, indicating a growing reliance on debt or other liabilities relative to equity.

Return on Equity (ROE)

ROE follows an ascending pattern commencing at 9.44% in November 2014, progressing consistently to over 15% by early 2018. This upward trajectory continues, with peaks exceeding 20% around early 2019. However, the ROE suffers a marked decline toward the end of the data series, dropping sharply to 3.67% in the latest quarter, which suggests a significant reduction in the company’s ability to generate returns on shareholders' equity.

Overall, while the company experienced periods of strong profitability and increasing efficiency in asset utilization between 2014 and 2019, there is evidence of increased financial leverage and a concerning downturn in profitability and returns in the most recent quarters. The data reflects a phase of financial stress or operational challenges that led to declines in key performance indicators.

Tax Burden

The tax burden ratio records a rising trend from 0.56 in November 2014 to a peak of 0.9 by November 2019, indicating a gradual increase in the proportion of income retained after tax. A slight dip to 0.81 is observed in May 2020, suggesting a minor reduction in after-tax profitability during that period.

Interest Burden

The interest burden ratio demonstrates slight fluctuations but shows an overall downward trend from 0.96 in November 2014 to 0.85 in May 2020. Notably, it drops sharply to 0.59 in May 2020, which could imply a significant increase in interest expenses or financial costs relative to EBIT in that quarter.

EBIT Margin

The EBIT margin exhibits variability over the periods analyzed. Starting near 4.73% in late 2014, it rises to a high of 6.2% in August 2014 but generally trends downward afterward, reaching 3.29% in May 2020. A sharp decline to 1.15% is evident at the end of the dataset, possibly reflecting challenges in operational efficiency or profitability during the last reported quarter.

Asset Turnover

Asset turnover shows a decreasing trend from 2.05 in November 2014 to a low near 1.19 by May 2014 but recovers steadily thereafter to reach a peak of 2.02 by November 2019. It then declines moderately to 1.61 in May 2020, indicating fluctuating efficiency in using assets to generate revenue with some recent weakness.

Financial Leverage

Financial leverage steadily increases over the sampled periods, rising from 1.82 in November 2013 to a high of 4.17 in May 2020. This pattern suggests a growing reliance on debt or other liabilities to finance assets, which may increase financial risk.

Return on Equity (ROE)

Return on equity shows a strong upward trend from 9.44% in November 2014 to a peak of 20.8% in February 2019, reflecting improving overall profitability and value creation for shareholders. However, a sharp decrease to 3.67% by May 2020 indicates significant pressure on returns, likely due to adverse factors impacting profit margins and leverage effects during this period.

The analysis of the quarterly financial data reveals several notable trends across net profit margin, asset turnover, and return on assets over the observed periods.

Net Profit Margin

The net profit margin demonstrated an overall positive trajectory starting from the early measurements in late 2013 and 2014, with values ranging just above 2.5% and gradually increasing to peak levels above 4% in the period of 2014 to 2016. Following this peak, margin percentages exhibited moderate fluctuations but tended to hover around the 3% to 4% range through 2017 and 2018. Toward the end of the dataset, particularly in 2019 and into mid-2020, there was a clear declining trend culminating in a significant dip down to approximately 0.55% in May 2020, signaling a potential compression in profitability in the most recent periods.

Asset Turnover

Asset turnover ratios presented initial volatility, beginning at a relatively high value of 2.05 in late 2014, then sharply declining to near 1.2 by mid-2015. After this decline, the ratio stabilized somewhat, oscillating between about 1.5 and 2.0 from 2015 through early 2019. Periods in late 2018 and early 2019 saw values approaching or slightly exceeding 2.0, indicating effective asset utilization for revenue generation during those periods. However, measurements in 2020 reveal a downward shift, with asset turnover decreasing to around 1.5 to 1.6, suggesting less efficient use of assets in generating sales in the most recent quarters.

Return on Assets (ROA)

The ROA figures followed a pattern roughly aligned with net profit margins, initiating around 5% in late 2013 and maintaining a generally upward movement to values surpassing 7% in 2018 and early 2019. This increase reflects an enhanced effectiveness in generating net income from total assets. The trend, however, reversed sharply starting in late 2019 through mid-2020, with the ROA plummeting to below 1%, which corresponds with the marked decline observed in net profit margin as well. This suggests deteriorating overall asset profitability during this timeframe.

In summary, while the company exhibited periods of improving profitability and asset efficiency from 2013 through early 2019, the financial performance indicators reveal a downward shift in 2019 and 2020, characterized by reductions in net profit margin, asset turnover, and return on assets. These changes may be indicative of operational challenges or external factors adversely affecting the company's financial health in the latest quarters analyzed.

Tax Burden

The tax burden ratio exhibits a general upward trend over the analyzed periods. Starting from 0.56 in November 2014, it increases steadily to reach a peak of 0.9 by November 2019. There is a slight decline to 0.81 in May 2020. This indicates an increasing proportion of earnings retained after tax over time, suggesting improved tax efficiency or changes in tax management strategies.

Interest Burden

The interest burden ratio demonstrates a gradual decrease from 0.96 in November 2014 to 0.85 by May and August 2019, followed by a significant drop to 0.59 in May 2020. This declining trend implies an escalating interest expense relative to earnings before interest and taxes, which may affect profitability and reflects increased financial costs or leverage.

EBIT Margin

The EBIT margin displays fluctuations with an initial rise from 4.73% in November 2014 to a high of 6.2% in August 2014, followed by a general downward trend. After peaking early, it diminishes to 1.15% by May 2020. The declining margin indicates decreasing operating profitability over the periods, which may point to rising costs or competitive pressures impacting earnings before interest and taxes.

Asset Turnover

The asset turnover ratio starts relatively high at 2.05 in November 2014, declines reaching a low of around 1.19 by May 2015, and then shows a recovery trend with fluctuations, reaching approximately 2.02 by November 2019. There is a decrease again to about 1.61 in May 2020. The pattern suggests varying efficiency in using assets to generate sales, with periods of both deterioration and improvement.

Return on Assets (ROA)

ROA shows an initial decline from 5.2% in November 2014 to 4.29% by February 2015, followed by varied fluctuations, with peaks around 7.61% in February 2019. However, the ratio declines again sharply to 0.88% in May 2020. This indicates an overall volatile trend in asset efficiency and profitability, with recent periods reflecting significant reduction in returns generated by company assets.

The financial ratios for the analyzed periods reveal several notable trends in profitability and operational efficiency.

Tax Burden

The tax burden ratio exhibits a generally increasing trend from 0.56 at the start to a peak near 0.9 in late 2019 and early 2020, before dipping to 0.81 by May 2020. This indicates growing retention of earnings post-tax over the years, although the last quarter shows a decline from previous highs, which could suggest changes in tax policies or transient factors affecting taxable income.

Interest Burden

This ratio shows a gradual decline over the timeline, dropping from approximately 0.96 to a low of 0.59 by May 2020. The downward movement implies increasing interest expenses relative to EBIT, which may reflect higher debt levels or rising interest costs, especially notable toward the final period where the decrease is more pronounced.

EBIT Margin

The EBIT margin has fluctuated throughout the analyzed periods, peaking around mid-2015 at roughly 6.2% before declining steadily to just over 1% by May 2020. This downward trajectory suggests deteriorating operating profitability, possibly due to increasing costs, pricing pressures, or other operational challenges impacting earnings before interest and taxes.

Net Profit Margin

Similarly, the net profit margin trends upward initially, reaching near 4.21% in mid-2014, followed by a gradual decline to approximately 0.55% in the last reported period. This pattern aligns with the EBIT margin’s trend but additionally accounts for interest and tax effects, highlighting an overall reduction in profitability retained from revenue over time, with significant margin compression by May 2020.

Overall, the data indicates that while tax efficiency has improved in the earlier years, rising interest burdens and decreasing operating margins have adversely affected the company's profitability in recent quarters. The sharp declines in both EBIT and net profit margins by the latest periods warrant further investigation into cost management, debt financing, and market conditions impacting financial performance.