Allergan PLC (NYSE:AGN)

The analysis of the quarterly financial ratios over the given period reveals significant fluctuations and notable trends in the company's profitability and leverage metrics.

Return on Assets (ROA)

The ROA exhibits a generally volatile pattern. It starts moderately around 3.44% in early 2016, peaks sharply to nearly 11.61% by the end of 2016, indicating improved asset efficiency during that year. However, from early 2017 onward, ROA declines substantially, turning negative by the third quarter of 2017, with values ranging mostly between -9.8% and -2.81% through to the first quarter of 2020. This negative trend signals decreasing effectiveness in generating profits from asset usage over this later period.

Financial Leverage

The financial leverage ratio remains relatively stable throughout the entire period, fluctuating gently within a narrow range from approximately 1.51 to 1.76. The highest leverage is observed in early 2016, after which it gradually declines towards the end of 2018. From early 2019 through the first quarter of 2020, it shows a slight upward trend but remains close to the lower end of the range. This steady ratio implies a consistent capital structure with limited changes in debt utilization relative to equity.

Return on Equity (ROE)

ROE mirrors the trends of ROA closely, starting with moderate positive returns around 6% in early 2016 and reaching a peak near 19.65% by the end of 2016. Following this peak, ROE drops substantially and turns negative in the third quarter of 2017. Negative returns deepen progressively, reaching as low as approximately -15.82% by the fourth quarter of 2019. A slight improvement appears in early 2020 but remains negative at -4.28%. The significant downturn in ROE highlights diminished shareholder value creation during this timeframe, aligning with the declines in operational profitability as seen in ROA.

In summary, while financial leverage remained stable, the company’s profitability metrics—both ROA and ROE—experienced a pronounced decline post-2016. This transition from strong positive returns to sustained negative performance suggests challenges in operational efficiency and returns to equity investors over the later years analyzed.

Net Profit Margin

The net profit margin displayed significant volatility throughout the period. It began with moderately strong values near 30% in early 2016, then surged dramatically to over 100% during the third and fourth quarters of 2016. However, starting in early 2017, the margin showed a sharp decline, turning negative in the third quarter of 2017 and remaining predominantly negative through to the first quarter of 2020. The margins reached their lowest points between late 2018 and 2019, indicating periods of substantial losses.

Asset Turnover

Asset turnover demonstrated a steady and gradual improvement over the entire period. Beginning at 0.12 in the first quarter of 2016, the ratio experienced a slight dip in mid-2016 but subsequently increased consistently each quarter, reaching 0.18 by the first quarter of 2020. This suggests incremental gains in the efficiency of utilizing assets to generate revenue.

Financial Leverage

Financial leverage ratios exhibited a modest downward trend from 1.76 in early 2016 to around 1.51 by the end of 2018, indicating a reduction in reliance on debt or other liabilities relative to equity during this time. However, from late 2018 to the first quarter of 2020, leverage increased slightly but remained relatively stable, ending at 1.52.

Return on Equity (ROE)

Return on equity fluctuated in correlation with profit margins. The metric started at a modest level around 6% in early 2016, rose sharply to nearly 20% by the end of 2016, but then declined abruptly, becoming negative from the third quarter of 2017 and staying in negative territory for most periods afterward. The lowest ROE occurred during 2019, reflecting significant challenges in generating shareholder returns. Although there was a mild recovery in late 2018 and early 2020, the overall trend signals a deteriorating capacity to produce positive returns for equity holders.

Tax Burden

The tax burden ratio shows moderate variability in the first six quarters, ranging between 1.07 and 1.6. The values peak around mid-2016, then briefly decrease and stabilize near 1.2 by mid-2017. However, data for subsequent periods is unavailable, limiting comprehensive long-term trend analysis for this metric.

Interest Burden

The interest burden ratio remains relatively stable during the first six quarters, fluctuating narrowly between 0.67 and 0.91. This suggests consistent management of interest expenses relative to earnings during this timeframe. Similar to the tax burden, later periods lack data, constraining extended analysis.

EBIT Margin

The EBIT margin shows significant volatility and an overall declining trend over the observed quarters. Starting strong with double-digit positive margins and exceptionally high values in 2016 (exceeding 100%), the margin declines sharply beginning in late 2017, turning negative and remaining negative through early 2020. The data indicate deteriorating operating profitability, marked by substantial losses in several quarters, suggesting challenges in operational efficiency or cost control.

Asset Turnover

Asset turnover demonstrates a gradual and steady improvement over the full period. Starting at 0.12, it increases incrementally to 0.18 by March 2020. This suggests a progressive enhancement in the company’s ability to generate sales from its asset base, reflecting a positive trend in asset utilization.

Financial Leverage

Financial leverage ratios display a slow but steady decline from 1.76 in early 2016 to roughly 1.5 by late 2018, indicating a slight reduction in leverage or debt relative to equity over this period. However, from late 2018 onward, the ratio increases mildly, reaching 1.63 by late 2019 before dropping again to 1.52 in early 2020. This pattern reflects some fluctuations in the company’s use of debt financing but remains within a narrow range overall.

Return on Equity (ROE)

ROE experiences notable swings throughout the period. Initially, it improves from around 6% in early 2016 to nearly 20% by the end of that year, indicating strong returns to shareholders initially. From 2017 onward, ROE declines sharply, falling into negative territory by late 2017 and continuing mostly negative with small recoveries interspersed. The trend signals declining profitability and challenges in creating shareholder value during these later years, correlated with the falling EBIT margins.

Net Profit Margin

The net profit margin exhibited significant volatility throughout the observed periods. Initially, it demonstrated strong positive values, peaking notably in the third quarter of 2016 at 107.27%. However, from late 2017 onwards, a sharp decline became evident, with values turning negative and reaching troughs around -58.5% in the third quarter of 2019. Although there was a modest recovery towards early 2020, the margin remained negative at -15.44%. This trend suggests considerable challenges in maintaining profitability during the latter half of the timeline.

Asset Turnover

Asset turnover showed a consistent and gradual improvement over the entire period. Starting at 0.12 in the first quarter of 2016, it increased steadily to 0.18 by the first quarter of 2020. This upward trend indicates incremental gains in the efficiency with which the company utilized its assets to generate revenue, reflecting a positive operational development despite profit margin difficulties.

Return on Assets (ROA)

Return on assets mirrored the pattern observed in net profit margin but displayed less extreme fluctuations. It began with moderate positive returns, peaking at 11.61% in the fourth quarter of 2016. Subsequently, ROA declined sharply, turning negative by mid-2017 and continuing downward to reach a nadir of -9.8% in the third quarter of 2019. A slight improvement was noted in early 2020, though ROA remained below zero at -2.81%. The trend illustrates deteriorating overall asset profitability, aligned with the negative shifts in net margins during the same timeframe.

Tax Burden Ratio

The tax burden ratio exhibits slight fluctuations during the periods from March 2016 to June 2017, remaining around 1.07 to 1.6. Data beyond June 2017 is not available, limiting the ability to observe longer-term trends in this ratio.

Interest Burden Ratio

From March 2016 to June 2017, the interest burden ratio ranges between 0.67 and 0.91, demonstrating relative stability without significant upward or downward trends. Data after June 2017 is missing, preventing further trend analysis.

EBIT Margin

The EBIT margin shows notable volatility during the observed timeline. Initial quarters through mid-2017 reflect strong positive margins, peaking at an unusually high 109.87% in September 2016. However, starting in late 2017, the margin shifts dramatically into negative territory and remains negative across all subsequent quarters up to March 2020. This shift marks a pronounced deterioration in operational profitability, with margins declining from around 70% to as low as approximately -60% before a partial recovery to around -21% by early 2020.

Asset Turnover

The asset turnover ratio demonstrates a consistent upward trend throughout the entire period. It starts at 0.12 in early 2016 and gradually increases to 0.18 by March 2020. This steady increase suggests improving efficiency in generating sales from assets.

Return on Assets (ROA)

ROA fluctuates initially, with positive values around 3% to nearly 12% through mid-2017. Subsequently, it declines sharply into negative values, reaching lows around -9.8% in late 2019. Despite a slight improvement in the final quarter observed, ROA remains negative by March 2020 at approximately -2.81%. The downward trend points to deteriorating overall profitability relative to asset base efficiency.

Tax Burden

The tax burden ratio experienced fluctuations in the first six quarters, beginning at 1.58 in March 2016, slightly increasing to 1.6 in June 2016, then sharply declining to 1.07 and 1.15 in the following two quarters. From March 2017 to June 2017, it remained relatively stable around 1.2 to 1.24. Data after June 2017 is not available, preventing further trend analysis for subsequent periods.

Interest Burden

The interest burden ratio showed a downward trend early on, starting at 0.69 in March 2016 and decreasing to 0.67 in June 2016. However, it rebounded noticeably to 0.91 in both September and December 2016, maintaining a similar level of 0.89 in the first two quarters of 2017. No data is provided beyond June 2017 to assess later developments.

EBIT Margin

EBIT margin revealed significant volatility across the quarterly periods examined. Initially, it increased from 27.19% in March 2016 to a peak of 109.87% in September 2016, followed by a slight decrease to 98.64% in December 2016. The margin remained high but somewhat reduced in early 2017 at 77.21% and 71.48%. From September 2017 onwards, the EBIT margin turned negative, beginning at -64.25% and fluctuating around negative values through to March 2020, where a slight improvement was noted at -20.94%. This shift indicates operational challenges or extraordinary expenses impacting earnings before interest and taxes during the later periods.

Net Profit Margin

The net profit margin exhibited a pattern similar to the EBIT margin. It started strongly with 29.44% in March 2016 and surged to over 100% in September and December 2016. After peaking, it declined progressively to 79.17% in June 2017. A marked downturn followed, with the margin becoming negative from September 2017 onward, although it showed some intermittent positive movement with 14.5% in September 2018. Nonetheless, this was followed by renewed negative margins through to March 2020, ending at -15.44%. This trend suggests deteriorating profitability after mid-2017, perhaps reflecting increased costs, reduced revenues, or one-time charges.