Amphenol Corp. (NYSE:APH)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrates a generally positive trend from 2019 to 2022, increasing steadily from approximately $1.28 billion to $2.04 billion. However, there is a slight decline observed in 2023, where NOPAT decreases marginally to about $2.01 billion. This indicates that while operational profitability improved significantly over most of the period, there may have been some challenges impacting profitability or operational efficiency in the most recent year.

Cost of Capital

The cost of capital shows a gradual increase throughout the analyzed period, starting at 16.18% in 2019 and rising to 16.94% in 2023. This steady upward trend suggests an increasing expense related to financing and the required rate of return by investors. The rising cost may reflect market conditions, changes in risk perception, or company-specific financial policy factors.

Invested Capital

Invested capital has consistently increased year-over-year, moving from approximately $9.03 billion in 2019 to roughly $13.75 billion in 2023. This growth denotes continued investment into the company's operations, assets, or business expansions. The steady rise in invested capital, coupled with the moderate growth in NOPAT, may have implications for the overall return on invested capital and efficiency of asset utilization.

Economic Profit

Economic profit has remained negative throughout the entire period, indicating that the company has not been generating returns above its cost of capital. Although losses narrowed notably in 2022 to around -$85.7 million, there was a significant reversion in 2023, with economic profit declining again to approximately -$319.3 million. This fluctuation signals challenges in value creation despite increasing operating profits and invested capital, underscoring that the return on invested capital has not kept pace with the rising cost of capital.

The financial data reveals a generally positive trend in profitability over the five-year period from 2019 to 2023, with some fluctuations in specific measures.

Net Income Attributable to Amphenol Corporation

This metric shows a consistent increase from 2019 to 2023, starting at 1,155,000 thousand US dollars in 2019 and rising to 1,928,000 thousand US dollars in 2023. The most significant jump occurred between 2020 and 2021, where net income increased by approximately 32.2%, from 1,203,400 to 1,590,800 thousand US dollars. Growth continued through 2022, reaching 1,902,300 thousand US dollars, before showing a more modest increase of about 1.3% into 2023.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a similar upward trend, rising from 1,277,245 thousand US dollars in 2019 to a peak of 2,040,201 thousand US dollars in 2022. This represents an overall increase of nearly 60%. There is a steady year-over-year improvement, with the largest increase again visible from 2021 to 2022. However, in 2023, there is a slight decline of approximately 1.5%, decreasing to 2,010,042 thousand US dollars. Despite this small reduction, the 2023 figure remains significantly higher than in the early years.

Overall, the data indicates strong growth in profitability, with both net income and NOPAT more than doubling during the examined timeframe. The minor dip in NOPAT in 2023 suggests a potential plateau or emerging challenges affecting operating profit, though net income continues to rise slightly. This pattern suggests effective operational performance and profitability growth over the longer term, with a need to monitor recent subtle downturns in operating profit closely.

The provision for income taxes and cash operating taxes for the analyzed periods reveal notable trends in tax-related expenses.

Provision for income taxes

There was a decrease from 331,900 thousand USD in 2019 to 313,300 thousand USD in 2020, indicating a reduction in estimated tax liabilities. In 2021, this figure sharply increased to 409,100 thousand USD, followed by a further rise to 550,600 thousand USD in 2022. However, in 2023, a slight decline to 509,300 thousand USD was observed, suggesting some relief in tax provisions compared to the previous year but still significantly higher than pre-pandemic levels.

Cash operating taxes

Cash operating taxes also decreased from 342,736 thousand USD in 2019 to 307,985 thousand USD in 2020, mirroring the provision trend and likely reflecting the impact of external economic factors. Beginning in 2021, cash taxes increased substantially to 464,115 thousand USD and continued to increase through 2022 and 2023, reaching 583,929 thousand USD and 599,691 thousand USD respectively. This steady increase indicates an upward pressure on actual tax payments despite the slight reduction in provisions in 2023.

Overall, the data shows a downward shift in both tax provisions and cash taxes during 2020, possibly due to extraordinary circumstances affecting taxable income. However, from 2021 onwards, both measures display a pronounced upward trend, highlighting a recovery or growth phase characterized by higher taxable earnings and increased cash tax outflows. The divergence in 2023, where cash taxes slightly rise while provisions fall, may suggest adjustments in expected future tax liabilities or timing differences in tax payments.

Total reported debt & leases

The total reported debt and leases exhibited an overall upward trend from 2019 through 2021, increasing from approximately $3.81 billion to $5.05 billion. This was followed by a decline in the subsequent two years, lowering the figure to about $4.64 billion by 2023. The initial rise may indicate increased leverage or financing activities, while the subsequent decrease suggests debt reduction or repayment strategies.

Stockholders’ equity attributable to Amphenol Corporation

Stockholders' equity showed consistent growth throughout the examined period, rising from roughly $4.53 billion in 2019 to $8.35 billion in 2023. This steady increase points to strengthening financial stability, possibly driven by retained earnings, profitable operations, or issuance of equity, thereby enhancing the company's net worth.

Invested capital

Invested capital demonstrated a continuous increase over the five years, expanding from approximately $9.03 billion to $13.75 billion. The upward trend reflects ongoing investments in assets, acquisitions, or capital expenditures supporting the company’s growth and operational capacity. The growth rate in invested capital generally outpaced that of debt, indicating a rising equity contribution.

Economic Profit

The economic profit exhibited a fluctuating trajectory over the analyzed periods. Initially, there was a sharp decline from -183,288 thousand US dollars to -289,448 thousand US dollars between 2019 and 2020, followed by a further decrease to -326,944 thousand US dollars in 2021. A notable improvement occurred in 2022, with economic profit rising to -85,679 thousand US dollars, indicating a significant reduction in economic losses. However, this was followed by a steep decline again in 2023, reaching -319,268 thousand US dollars, nearing previous low levels.

Invested Capital

The invested capital demonstrated steady growth throughout the period under review. Starting at 9,029,400 thousand US dollars in 2019, it increased each year, reaching 13,752,400 thousand US dollars by the end of 2023. This consistent rise suggests ongoing capital investment or asset accumulation by the entity over the five years.

Economic Spread Ratio

The economic spread ratio, reflective of the returns spread over the cost of capital, remained negative during the entire period, signaling returns below the cost of capital. It worsened from -2.03% in 2019 to -2.88% in 2020, slightly recovered to -2.71% in 2021, and then significantly improved in 2022 to -0.67%, the least negative point observed. However, this improvement was not sustained, as the ratio declined again to -2.32% in 2023. Overall, the ratio trends aligned with the economic profit changes, mirroring the periods of improvement and decline.

Net Sales

Net sales show a consistent upward trend from 2019 through 2022, increasing from approximately 8.23 billion USD in 2019 to 12.62 billion USD in 2022. However, there is a slight decline in 2023, where net sales decrease marginally to around 12.55 billion USD.

Economic Profit

The economic profit remains negative throughout the analyzed period, indicating that the company did not generate value above its cost of capital. Although there was an improvement in 2022, where economic profit rose to approximately -85.7 million USD compared to larger deficits in prior years, the figure deteriorated again significantly in 2023 to nearly -319.3 million USD. This volatility suggests fluctuating operational effectiveness or cost structure changes relative to capital costs.

Economic Profit Margin

The economic profit margin corresponds with the trend seen in economic profit, remaining negative over the entire period. It decreased from -2.23% in 2019 to its lowest point of -3.37% in 2020, slightly improved in subsequent years, reaching -0.68% in 2022, but then worsened again to -2.54% in 2023. This reflects the company's challenge in converting sales into value-added returns beyond capital expenses, despite strong revenue growth.

Overall Analysis

While the company demonstrates strong sales growth up to 2022, the persistent negative economic profit and margins highlight ongoing issues with cost control or capital efficiency. The temporary improvement in 2022 may indicate some operational adjustments or favorable conditions that year, but the reversal in 2023 suggests these were not sustained. The decrease in sales combined with a significant drop in economic profit that year may warrant further investigation into market conditions, cost dynamics, or strategic decisions during that period.