Amphenol Corp. (NYSE:APH)

The financial data reveals notable trends in the composition and valuation of intangible assets over the five-year period ending December 31, 2023.

Goodwill

There is a consistent upward trend in goodwill, increasing from approximately $4.87 billion in 2019 to $7.09 billion in 2023. This growth suggests significant acquisition activity or revaluation of acquired assets during the period.

Customer Relationships

Customer relationships, a component of intangible assets, increased markedly from $446.2 million in 2019 to $782.6 million in 2023, with especially strong growth between 2020 and 2021. This indicates expanding value attributed to established customer bases, likely through acquisitions or organic growth in business relationships.

Proprietary Technology

Proprietary technology showed stability between 2019 and 2020 but experienced a substantial increase by 2021, nearly doubling from $156 million to $311 million. The level plateaued slightly in 2022 before rising again in 2023 to $365.1 million, reflecting ongoing investment or capitalizing of technology assets.

Backlog and Other

This category exhibited steady growth each year, rising from $49.7 million in 2019 to $114.1 million in 2023. This growth reflects increasing future contractual obligations or orders that contribute to the intangible asset base.

Intangible Assets, Definite-lived, Gross

Definite-lived intangible assets increased significantly from approximately $652 million in 2019 to $1.26 billion in 2023. This increase aligns with the trends seen in customer relationships, proprietary technology, and backlog, which collectively compose this category.

Accumulated Amortization

Accumulated amortization grew from $396 million to $696.1 million over the same period, reflecting the systematic expensing of definite-lived intangible assets. The consistent increase indicates ongoing amortization charges impacting the net intangible asset value.

Intangible Assets, Definite-lived, Net

The net value showed some fluctuation, declining from $255.9 million in 2019 to $211.4 million in 2020 before recovering strongly to $488.8 million in 2021. A slight decline to $465 million in 2022 was followed by an increase to $565.7 million in 2023. This pattern suggests the acquisition of new intangible assets outpacing amortization in the latter years.

Trade Names (Intangible Assets, Indefinite-lived)

Trade names remained stable at $186.1 million from 2019 through 2020, after which there was a sizable increase to $268.1 million in 2021, and remained nearly flat thereafter. This reflects a reassessment or addition of indefinite-lived intangible assets related to trade names.

Intangible Assets, Total

Total intangible assets, excluding goodwill, displayed fluctuations but an overall upward trajectory, increasing from $442 million in 2019 to $834.8 million in 2023. The variations are consistent with the changes observed in definite-lived and indefinite-lived asset categories.

Goodwill and Other Intangible Assets, Combined

The combined total grew steadily from $5.31 billion in 2019 to $7.93 billion in 2023, underscoring a broader strategy of growth through acquisitions or asset revaluation. The incremental increases each year highlight a continuous enhancement of intangible asset value on the balance sheet.

In summary, the data reflects a consistent expansion of intangible assets, driven primarily by increases in goodwill, customer relationships, and proprietary technology. Amortization of definite-lived assets has grown but is generally outpaced by new acquisitions or asset recognition, leading to net growth in intangible assets. The stability and increases in indefinite-lived assets such as trade names further support the positive trend in intangible asset valuation.

Total Assets

Reported total assets show a continuous upward trend, increasing steadily each year from approximately 10.8 billion US dollars at the end of 2019 to about 16.5 billion by the end of 2023. This indicates sustained asset growth over the five-year period.

Adjusted total assets, which exclude goodwill effects, also display consistent growth, rising from roughly 5.95 billion US dollars in 2019 to approximately 9.43 billion in 2023. Although the adjusted figures are significantly lower than the reported totals, the upward trend is clear and indicates asset base expansion even after adjusting for goodwill.

Stockholders’ Equity

Reported stockholders’ equity attributable to Amphenol Corporation increases steadily from 4.53 billion US dollars in 2019 to 8.35 billion in 2023, reflecting a healthy growth in shareholders’ capital over the years.

Adjusted stockholders’ equity, however, shows notable volatility. It starts with a negative value of approximately -337 million in 2019, changes to a positive 353 million in 2020, then dips back to a negative 75 million in 2021 before returning to positive territory and increasing to about 1.25 billion by 2023.

This fluctuation in adjusted equity suggests that when goodwill is excluded, the company's net equity position experienced some instability during the early years but improved steadily in the last two periods, indicating potential asset impairments or revaluations affecting goodwill initially, followed by more stable operations or asset valuations subsequently.

Overall Insights

The company exhibits overall growth in both reported and adjusted asset bases, signifying expansion and asset accumulation.

While reported equity grows consistently, adjusted equity shows some variability, highlighting the impact of goodwill adjustments on shareholders’ equity and potentially underlying changes in intangible asset values.

The improving trend in adjusted equity by the end of the period suggests strengthening fundamentals after accounting for goodwill, enhancing the quality of the equity base.

Total Asset Turnover

The reported total asset turnover ratio exhibits moderate fluctuations over the five-year period. It decreased from 0.76 in 2019 to 0.7 in 2020, then gradually increased to 0.82 in 2022 before slightly declining to 0.76 in 2023. The adjusted total asset turnover, which accounts for goodwill, shows a similar trend but at significantly higher levels, reflecting a higher efficiency in asset utilization when goodwill is excluded. It decreases from 1.38 in 2019 to 1.18 in 2020, then recovers to a peak of 1.42 in 2022, followed by a slight decline to 1.33 in 2023.

Financial Leverage

The reported financial leverage ratio shows a steady decline from 2.39 in 2019 to 1.98 in 2023, indicating a gradual reduction in reliance on debt financing over the period. The adjusted financial leverage, which excludes goodwill effects, displays notably higher and more volatile values with a peak of 20.68 in 2020, reducing significantly to 7.52 in 2023. This suggests that goodwill has a considerable impact on the leverage measurement, and the company has been lowering its adjusted leverage substantially after 2020.

Return on Equity (ROE)

Reported ROE percentages fluctuate, starting at 25.5% in 2019 and declining to 22.35% in 2020, then recovering to 27.12% in 2022 before dropping again to 23.1% in 2023. The adjusted ROE, which excludes goodwill, presents abnormally high values, peaking at over 340% in 2020 and 2022, with a sharp decrease to 153.74% in 2023. These extreme values suggest that goodwill adjustments significantly magnify ROE, indicating that the exclusion of goodwill results in a much higher efficiency measure, though it also introduces considerable volatility.

Return on Assets (ROA)

Reported ROA shows a consistent upward trend from 10.68% in 2019 to 12.41% in 2022, followed by a slight decrease to 11.67% in 2023. The adjusted ROA, excluding goodwill, confirms a similar pattern but at higher absolute levels. Starting at 19.42% in 2019, it declines to 16.5% in 2020, then recovers to a high of 21.42% in 2022, and slightly decreases to 20.44% in 2023. This implies improving asset profitability over time, with higher efficiency when goodwill is adjusted out.

Overall Insights

The data indicates that goodwill has a substantial impact on key financial ratios, especially leverage and profitability measures. Adjusted ratios generally show higher efficiency and profitability, suggesting that goodwill may inflate asset bases and equity, thus dampening these metrics when reported figures are used. The trend of decreasing financial leverage points to a strategic reduction in debt, while the fluctuations in asset turnover and returns suggest variability in operational performance and profitability. The elevated and volatile adjusted ROE highlights the sensitivity of equity returns to goodwill adjustments and may require cautious interpretation.

Total Assets

The reported total assets show a steady increase over the five-year period, growing from approximately $10.8 billion in 2019 to about $16.5 billion in 2023. This signifies a consistent expansion in the asset base, with a compound growth trend. The adjusted total assets, which exclude goodwill, also increase gradually from roughly $5.9 billion in 2019 to around $9.4 billion in 2023, suggesting an underlying increase in tangible or non-goodwill assets.

Total Asset Turnover

The reported total asset turnover ratio exhibits some variability, beginning at 0.76 in 2019 and dipping to 0.70 in 2020. It then recovers to 0.74 in 2021, peaks at 0.82 in 2022, and slightly declines to 0.76 in 2023. This pattern indicates fluctuations in how efficiently the company uses its assets to generate sales, with a notable improvement in 2022 before a slight retraction the following year.

The adjusted total asset turnover ratio, which considers only assets excluding goodwill, follows a somewhat similar trend but at significantly higher levels. It starts at 1.38 in 2019, declines to 1.18 in 2020, increases to 1.31 in 2021, reaches a high of 1.42 in 2022, and then drops modestly to 1.33 in 2023. This suggests that when goodwill is excluded, the company’s asset utilization efficiency appears substantially better, and the improvements in turnover are more pronounced over the years, particularly in 2022.

General Observations

The consistent increase in both reported and adjusted total assets indicates ongoing investments and asset accumulation. The relative stability and improvement in total asset turnover ratios, especially the adjusted ratio, imply that the company has managed to enhance or maintain operational efficiency despite asset growth. The higher turnover ratios excluding goodwill highlight the impact of goodwill on overall asset utilization metrics and suggest that the tangible asset base is being effectively employed to generate revenue.

The financial data indicates a consistent increase in the reported total assets over the five-year period, rising from $10.82 billion in 2019 to $16.53 billion in 2023. This upward trend reflects steady growth in the asset base of the company. Similarly, the adjusted total assets, which presumably exclude goodwill, show a parallel increase from approximately $5.95 billion in 2019 to $9.43 billion in 2023, indicating that the tangible asset base is expanding as well.

Stockholders’ equity attributable to Amphenol Corporation also demonstrates a positive trajectory. The reported equity grew from roughly $4.53 billion in 2019 to $8.35 billion in 2023, which suggests strengthening shareholder value and potentially increased retained earnings or equity infusions. In contrast, the adjusted stockholders’ equity shows more volatility and even negative values in the earlier years (for instance, -$336.8 million in 2019), but turns positive and increases to about $1.25 billion by 2023. This indicates significant adjustments due to goodwill or other intangible assets impacting the equity on a reported basis.

Regarding financial leverage, the reported ratio decreased steadily from 2.39 in 2019 to 1.98 in 2023. This decline suggests a strengthening balance sheet with relatively lower debt levels or higher equity relative to liabilities. On the adjusted basis, the financial leverage ratio is significantly higher and more volatile, with the 2020 value exceeding 20 and dropping to 7.52 in 2023. The elevated adjusted leverage ratios imply that when goodwill is excluded, the company’s leverage appears substantially higher, reflecting a heavier debt burden relative to tangible equity.

Total Assets

Consistent growth observed in both reported and adjusted values over the five-year period.

Stockholders' Equity

Reported equity shows steady increase, indicating strengthening shareholder value; adjusted equity fluctuates initially but becomes positive and grows in later years.

Financial Leverage

Reported leverage decreases gradually, indicating improved solvency; adjusted leverage is considerably higher and volatile, implying greater financial risk when intangible assets are excluded.

The data reveals evolving financial metrics over the period from the end of 2019 through the end of 2023. An examination of the reported stockholders’ equity attributable to the company indicates a consistent upward trend. The value increased steadily each year, starting at approximately $4.53 billion in 2019 and reaching about $8.35 billion by 2023. This suggests a solid growth in the company’s net assets over the five-year span.

In contrast, the adjusted stockholders’ equity figures exhibit notable variability. Starting with a negative value near -$337 million in 2019, it shifted to a positive $353 million in 2020, then reflected a negative value again in 2021 at approximately -$75 million. This was followed by a recovery to positive equity amounts in 2022 and 2023, reaching about $1.25 billion in 2023. The fluctuations in adjusted equity could imply adjustments for goodwill or other accounting reclassifications impacting the recognized equity.

Reported return on equity (ROE) percentages demonstrate some fluctuations, with an initial value of 25.5% in 2019, a slight dip to 22.35% in 2020, and a rebound above 25% in 2021. It peaked in 2022 at around 27.12% before declining to 23.1% in 2023. These figures reflect relatively strong profitability in relation to reported equity, albeit with modest variability.

Adjusted ROE values, available for selected years only, present extreme volatility. The value in 2020 was extraordinarily high at 341.1%, with an absence of data in 2021, followed by another very high figure of 334.03% in 2022, and a substantial decrease to 153.74% in 2023. Such pronounced changes may be driven by the fluctuations in adjusted equity values, potentially leading to amplified ratios due to lower equity bases in certain periods.

Stockholders’ Equity

Reported equity shows steady and continuous growth, indicating an increasing net asset base.

Adjusted equity is more volatile, reflecting significant swings likely related to accounting adjustments or goodwill impacts.

Return on Equity (ROE)

Reported ROE maintains a generally stable and robust profile, fluctuating within a moderate range but remaining strong.

Adjusted ROE figures are highly volatile, with exceptionally high ratios in some years, possibly influenced by the adjusted equity’s variability.

The analysis of the data reveals clear trends in the asset base and return on assets (ROA) for the years 2019 through 2023, considering both reported and goodwill adjusted figures.

Total Assets

Reported total assets exhibit a steady increase over the five-year period, rising from approximately US$10.8 billion in 2019 to US$16.5 billion in 2023. This demonstrates a continuous expansion of the company's asset base.

Adjusted total assets, which exclude goodwill, also show consistent growth but at a lower absolute level, increasing from about US$5.9 billion in 2019 to US$9.4 billion in 2023. This pattern suggests ongoing asset accumulation without proportionate increases tied to goodwill.

Return on Assets (ROA)

The reported ROA remains relatively stable, fluctuating between a low of 9.76% in 2020 and a high of 12.41% in 2022, before settling at 11.67% in 2023. This indicates the company’s ability to maintain profitability relative to its total reported assets despite growth.

The adjusted ROA is consistently higher than the reported ROA, ranging from 16.5% in 2020 to a peak of 21.42% in 2022, followed by a slight decline to 20.44% in 2023. This difference highlights the impact of excluding goodwill on profitability metrics, suggesting that underlying asset performance without goodwill is particularly strong.

Comparative Insights

The gap between reported and adjusted total assets reflects a significant portion of goodwill on the balance sheet, which grows over time but at a slower pace compared to the overall asset growth.

The relatively higher adjusted ROA implies that when goodwill is removed, asset efficiency and profitability improve, indicating that core operational assets generate more return.

Overall, the data portrays a company with expanding asset levels and maintaining strong profitability relative to its asset base, with adjusted figures offering a more favorable view of asset utilization efficiency.