Western Digital Corp. (NASDAQ:WDC)

The analysis of the financial performance over the given periods reveals notable fluctuations in profitability and leverage ratios.

Return on Assets (ROA)

The ROA exhibits significant variability, starting at 2.31% in 2018 and declining sharply to -2.86% in 2019. It slightly improved in 2020 but remained negative at -0.97%. A strong recovery is observed in 2021 and 2022, reaching 3.14% and 5.71% respectively. However, the most recent period shows a substantial decline to -6.98%, indicating a considerable deterioration in asset profitability.

Financial Leverage

Financial leverage shows a gradual decreasing trend across the periods. It started at 2.54 in 2018 and increased marginally to a peak of 2.69 in 2020. Subsequently, it decreased steadily to reach 2.08 by 2023. This reduction suggests a modest deleveraging or reduced dependency on debt financing over the years.

Return on Equity (ROE)

ROE displays a pattern similar to ROA, indicating fluctuating profitability from the shareholders' perspective. It was positive at 5.85% in 2018, then sharply negative at -7.56% in 2019, and slightly less negative at -2.62% in 2020. A recovery phase is observed in 2021 and 2022, peaking at 7.66% and 12.27% respectively. The year 2023 shows a pronounced decline to -14.55%, reflecting significant challenges in generating returns for equity holders.

Overall, the data reflect a volatile profitability situation with two distinct recovery phases followed by significant downturns, while financial leverage has gradually decreased, possibly indicating a cautious approach to financing amidst earnings instability.

Net Profit Margin

The net profit margin exhibited considerable volatility over the periods. Initially positive at 3.27% in 2018, it dropped sharply to -4.55% in 2019, followed by a slight improvement to -1.49% in 2020. The margin then improved significantly to 4.85% in 2021 and further to 7.98% in 2022, indicating enhanced profitability during these years. However, in 2023, the margin declined drastically to -13.85%, reflecting a substantial decrease in profitability.

Asset Turnover

The asset turnover ratio demonstrated modest fluctuations within a relatively narrow range. Starting at 0.71 in 2018, it decreased to 0.63 in 2019, then experienced a gradual increase to 0.65 in 2020 and 2021. In 2022, it reached its highest point in the observed period at 0.72, suggesting improved efficiency in asset utilization. Nevertheless, it declined notably to 0.50 in 2023, indicating reduced effectiveness in generating sales from assets.

Financial Leverage

Financial leverage ratios showed a general decreasing trend over the years. From 2.54 in 2018, the ratio increased slightly to 2.65 in 2019 and 2.69 in 2020. Subsequently, it declined steadily to 2.44 in 2021, 2.15 in 2022, and reached the lowest recorded value of 2.08 in 2023. This trend suggests a gradual reduction in the company’s reliance on debt financing relative to equity.

Return on Equity (ROE)

The return on equity closely mirrored the fluctuations observed in net profit margin. Beginning at 5.85% in 2018, it declined sharply to -7.56% in 2019 and improved slightly to -2.62% in 2020. ROE then showed a recovery, rising to 7.66% in 2021 and peaking at 12.27% in 2022, signaling enhanced returns to shareholders. However, a steep decline occurred in 2023, with ROE dropping to -14.55%, marking a significant reduction in equity profitability.

The financial data reveals several notable trends and fluctuations over the observed periods.

Tax Burden

The tax burden ratio is available for limited years, showing a significant increase from 0.32 in 2018 to 0.89 in 2020, followed by a gradual decrease to 0.71 in 2022. This indicates variability in the effective tax rate impacting net income.

Interest Burden

The interest burden ratio exhibits volatility, beginning at 0.76 in 2018, dropping sharply to negative values in 2019 and 2020 (-1.58 and -0.13 respectively), and then rebounding to positive values in subsequent years, reaching 0.87 in 2022. This suggests fluctuating interest expense effects relative to earnings before interest and taxes over the period.

EBIT Margin (%)

The EBIT margin shows considerable variation, initially high at 13.37% in 2018, declining significantly to a low of 1.1% in 2019, with a modest recovery through 2021 (7.4%) and 2022 (12.91%). However, this trend reverses in 2023, showing a substantial negative margin of -10.13%, indicative of operational challenges or increased costs impacting core profitability.

Asset Turnover

Asset turnover remains relatively stable, fluctuating slightly between 0.50 and 0.72 across the years. It peaked at 0.72 in 2022 but decreased to 0.50 in 2023, reflecting slight changes in the efficiency with which assets generate revenue.

Financial Leverage

Financial leverage ratios show a gradual decline from 2.54 in 2018 to 2.08 in 2023, suggesting a reduction in the reliance on debt financing or a shift in capital structure over the period.

Return on Equity (ROE) (%)

ROE trends closely follow the fluctuations in profitability metrics. Starting at a positive 5.85% in 2018, it falls to negative values in 2019 and 2020 (-7.56% and -2.62%), recovers strongly in 2021 and 2022 (7.66% and 12.27%), but then experiences a sharp decline to -14.55% in 2023. This volatility reflects inconsistent profitability and indicates potential concerns with net income generation relative to shareholder equity.

Net Profit Margin

The net profit margin exhibited considerable volatility over the analyzed periods. It began positively at 3.27% in mid-2018 but declined sharply into negative territory, reaching -4.55% by mid-2019. Although there was some improvement with a smaller loss of -1.49% in 2020, the margin rebounded to a positive 4.85% by mid-2021 and further increased to 7.98% in mid-2022. However, the margin experienced a significant downturn to -13.85% in the latest period of mid-2023, indicating a sharp deterioration in profitability.

Asset Turnover

The asset turnover ratio showed relative stability with minor fluctuations. Starting at 0.71 in 2018, it decreased to 0.63 in 2019, then slightly increased to 0.65 in both 2020 and 2021. There was a peak at 0.72 in 2022, suggesting improved efficiency in asset utilization that year. Nevertheless, the ratio dropped to 0.50 in 2023, indicating a decline in how effectively the company generated revenue from its assets.

Return on Assets (ROA)

Return on assets followed a pattern analogous to the net profit margin, indicating challenges in generating returns from assets. Starting at 2.31% in 2018, ROA turned negative to -2.86% in 2019 and slightly improved to -0.97% in 2020. The return recovered to positive values thereafter, reaching 3.14% in 2021 and peaking at 5.71% in 2022. The latest data point reveals a considerable decline to -6.98% in 2023. This trajectory suggests fluctuating effectiveness in asset use over the period, with notable setbacks in recent performance.

Tax Burden

The tax burden ratio shows notable variability, with a low value of 0.32 in 2018 and a significant increase to 0.89 in 2020, followed by a decrease to 0.71 in 2022. This indicates fluctuations in the portion of earnings retained after taxes over the observed periods.

Interest Burden

This ratio demonstrates considerable volatility, beginning at 0.76 in 2018, dropping sharply to negative values in 2019 (-1.58) and 2020 (-0.13), before recovering to positive values of 0.74 in 2021 and 0.87 in 2022. The initial negative values suggest periods of significant interest expense impacts adversely affecting earnings before tax.

EBIT Margin

The EBIT margin displays a fluctuating trend, starting at 13.37% in 2018, then declining sharply to 1.1% in 2019, with a slight increase to 2.19% in 2020, followed by a larger recovery to 12.91% in 2022. However, the margin dropped substantially to -10.13% in 2023, indicating a period of operating losses.

Asset Turnover

Asset turnover remains relatively stable with minor fluctuations, ranging from 0.63 to 0.72 between 2018 and 2022, before declining to 0.5 in 2023. This suggests consistent efficiency in using assets to generate sales until a decrease in efficiency is observed in the latest period.

Return on Assets (ROA)

Return on assets shows a pattern of instability, with a positive 2.31% in 2018, followed by negative returns in 2019 (-2.86%) and 2020 (-0.97%). ROA then improves to positive figures in 2021 (3.14%) and peaks at 5.71% in 2022, before declining sharply to -6.98% in 2023, highlighting profitability challenges in the most recent year.

The financial data reflects varying trends across key profitability and burden ratios over a six-year period.

Tax Burden Ratio

The tax burden ratio is recorded at 0.32 in 2018, rising significantly to 0.89 in 2021, and then decreasing to 0.71 in 2022. Data for 2019, 2020, and 2023 are missing, which limits full trend analysis, but the available figures suggest some fluctuations with a peak in 2021.

Interest Burden Ratio

The interest burden ratio shows considerable volatility. It starts at a positive 0.76 in 2018, declines sharply to negative values in 2019 and 2020 (-1.58 and -0.13 respectively), and then recovers to positive ratios of 0.74 in 2021 and 0.87 in 2022. This indicates an initial period of increased interest expense or reduced EBIT in 2019 and 2020 followed by improvement in subsequent years.

EBIT Margin

The EBIT margin exhibits significant fluctuations. It is relatively strong at 13.37% in 2018 but drops sharply to 1.1% in 2019, with a slight improvement to 2.19% in 2020. The margin increases further to 7.4% in 2021 and peaks at 12.91% in 2022, indicating strengthening operating profitability. However, there is a notable decline to -10.13% in 2023, signaling operational losses or substantial expenses affecting EBIT.

Net Profit Margin

The net profit margin follows a pattern similar to EBIT margin but with generally lower values and higher volatility. It starts positive at 3.27% in 2018, turns negative in 2019 and 2020 (-4.55% and -1.49% respectively), recovers to positive 4.85% in 2021, and further rises to 7.98% in 2022. In 2023, it declines dramatically to -13.85%, indicating negative net profitability despite earlier improvements.

In summary, the company experiences periods of financial stress, specifically around 2019 and 2020, with recovery in 2021 and 2022. However, 2023 shows a marked deterioration in profitability metrics, both at EBIT and net profit levels, which may warrant further investigation into operational or external factors impacting performance during that year.