Builders FirstSource Inc. (NYSE:BLDR)

Return on Assets (ROA)

The Return on Assets metric was not reported until March 31, 2019, after which it displayed moderate fluctuations initially, with values ranging between 5.09% and 7.51% from 2019 to 2020. Starting in 2021, a significant upward trend is observable, with ROA increasing steadily from 8.43% in September 2021 to a peak of 25.95% in September 2023. Despite a slight decline towards the end of the period, with ROA decreasing to 14.66% in the last quarter, the overall trajectory suggests improved asset efficiency and profitability over the analyzed period.

Financial Leverage

Financial Leverage showed a consistent decline from high levels of 7.76 in the first quarter of 2018 down to around 3.62 by the last quarter of 2020. This decline reflects a progressive reduction in leverage and potentially an improved capital structure or lower reliance on debt. From 2021 onward, leverage stabilized at lower levels, ranging between approximately 1.88 and 2.47, indicating a markedly more conservative financial position relative to earlier years. No extreme volatility was noted during this stabilization phase.

Return on Equity (ROE)

ROE, like ROA, began to be reported in March 2019, showing strong performance initially in the 20% to 35% range until early 2021. Post this period, a remarkable growth phase is evident as ROE climbed from 25.76% in December 2021 to a peak value of 55.4% in September 2023. This sharp increase in equity returns suggests enhanced profitability and effective use of shareholders' equity. However, in the final quarters analyzed, a downtrend is visible, with ROE reducing to 34.37% by September 2023, though still above the levels seen in the initial years.

Cross-Metric Insights

The data indicates a general improvement in profitability ratios (ROA and ROE) alongside a substantial decrease and subsequent stabilization in financial leverage. The reduced leverage may have contributed to higher ROA and ROE by mitigating financial risk and enhancing operational efficiency. The peak periods of profitability coincide with maintained moderate financial leverage, suggesting that the company optimized its capital structure effectively. The recent declines in profitability metrics towards the end of the reporting periods warrant monitoring but remain at levels higher than the earlier years, reflecting overall strengthened financial health.

The analysis of the quarterly financial data reveals several notable trends in profitability, efficiency, leverage, and overall return on equity for the company over the observed periods.

Net Profit Margin

The net profit margin exhibits an overall upward trajectory from early 2019 through 2023. Starting at approximately 2.66% in March 2019, it gradually increases, reaching a peak around 12.2% by December 2022. There is a slight decline observed into 2023, with the margin decreasing to around 9.1% by September 2023. These movements suggest improving profitability over most of the period, with a some moderation in profit margins in the later quarters.

Asset Turnover

Asset turnover shows a downward trend from early 2019 through mid-2021, decreasing from about 2.63 to a low near 1.17 by March 2021. From this point, there is a recovery phase, with asset turnover rising steadily to approximately 2.14 by March 2023. Afterward, slight decreases are recorded, dropping to near 1.61 by September 2023. This pattern indicates a period of declining efficiency in asset utilization followed by a recovery phase, and a recent slight weakening.

Financial Leverage

The financial leverage ratio declines substantially from early 2018 levels, from as high as 7.76 to approximately 3.62 by the end of 2020. This reduction continues more gradually until early 2021, dropping further to below 2.0 by March 2021. Through the remainder of the observed quarters, leverage remains relatively stable, fluctuating between roughly 2.14 and 2.47. The significant deleveraging in earlier periods likely contributed to changes in risk profile, and subsequent stabilization indicates a more conservative capital structure.

Return on Equity (ROE)

ROE data, available starting in early 2019, displays a decreasing trend from 34.41% in March 2019 to a low near 9.58% by March 2021. Following this trough, there is a pronounced recovery and improvement, with ROE climbing sharply to a peak of about 55.4% by March 2023. Subsequently, a decline to approximately 34.37% occurs by September 2023. This volatility in ROE reflects fluctuations in profitability, asset efficiency, and leverage. The sharp rise post-2021 may be linked to operational improvements and effective capital management, while the recent decrease suggests moderation in returns.

Overall, the company appears to have improved profit margins and managed to reduce financial leverage significantly over the years, contributing to enhanced equity returns despite fluctuations in asset turnover. The recent declines in net profit margin, asset turnover, and ROE suggest some emerging challenges or normalization after strong performance periods.

The analyzed financial data reveals notable trends across various performance and efficiency metrics over the observed quarters.

Tax Burden

The tax burden ratio remained relatively stable throughout the periods, fluctuating narrowly around 0.77 to 0.79, indicating a consistent proportion of earnings retained after taxes without significant variation.

Interest Burden

The interest burden demonstrated a notable improvement over time. Initially, the ratio hovered around the low 0.70s, indicating substantial interest expenses relative to earnings. From 2020 onwards, there is a progressive increase towards the mid-0.90s, highlighting a decreasing interest expense impact and improved interest coverage.

EBIT Margin

The EBIT margin exhibited an upward trajectory. Starting near 4.78% in early 2019, the margin steadily increased over subsequent quarters, reaching peak values above 16% in 2022 and early 2023 before slightly tapering to around 12.78% by the latest quarter. This improvement suggests enhanced operational profitability over the time frame.

Asset Turnover

Asset turnover experienced a mixed trend. Early periods showed a decline from approximately 2.63 to below 2.0 by 2020, followed by a significant dip to near 1.17 in early 2021. Subsequently, turnover rose progressively toward values around 2.14 by late 2022 but declined again thereafter. This volatility indicates fluctuations in asset utilization efficiency.

Financial Leverage

Financial leverage sharply decreased from very high levels above 7.7 in 2018 to approximately 2.0 by 2021, reflecting a substantial reduction in reliance on debt or fixed financial obligations. Post-2021, leverage remained relatively flat with minor fluctuations around the 2.0 to 2.4 range, suggesting a more conservative capital structure was maintained.

Return on Equity (ROE)

ROE showed considerable variability. Early in the period, it ranged in the mid-30% level, then decreased to about 21% by late 2020. From 2021 onward, the metric increased sharply, achieving peaks above 55% in late 2022. The ROE then declined in 2023 but remained strong above 30%, indicative of improved value generation for shareholders corresponding with operational gains and financial structure changes.

Overall, the data indicates a successful reduction in financial leverage and interest burden, coupled with improved profitability as reflected in the EBIT margin and ROE. However, asset utilization demonstrated some instability. The combination of these patterns suggests effective operational management and financial restructuring efforts over the analyzed periods.

The analysis of the quarterly financial ratios reveals several key trends over the observed periods.

Net Profit Margin (%)

The net profit margin shows a general upward trend from March 2019 through the end of 2022. Beginning around 2.66% in the first quarter of 2019, it gradually increases each quarter, peaking at 12.2% in December 2022. Following this peak, a slight decline is observed in 2023, with the margin decreasing to 9.1% by the third quarter. This pattern indicates improved profitability over the years, with some recent contraction in profit margin in 2023.

Asset Turnover (ratio)

Asset turnover experiences a decreasing trend from the first quarter of 2019 (2.63) through mid-2021, hitting a low point of approximately 1.17 in March 2021. After this trough, the ratio begins to recover, steadily rising to about 2.14 by the first quarter of 2023. However, this recovery is followed by a slight decline towards the third quarter of 2023. This indicates a period of reduced efficiency in asset utilization until early 2021, followed by an improvement, though not fully restoring the starting levels by late 2023.

Return on Assets (ROA) (%)

ROA shows a fluctuating but overall positive trajectory. Starting near 7% in March 2019, it dips slightly mid-2020 but then increases significantly, reaching a peak of 25.95% in the third quarter of 2022. Post this peak, ROA declines to approximately 14.66% by the third quarter of 2023. This trend reflects growing efficiency and profitability in asset utilization, particularly strong growth in 2021 and early 2022, followed by a notable reduction in 2023.

In summary, the company demonstrated substantial improvements in profitability and asset utilization from 2019 through 2022, as evidenced by increasing net profit margin and ROA. However, asset utilization as measured by asset turnover showed a period of decline until early 2021 before improving. The latter part of the data, covering 2023, suggests emerging challenges with slight declines in all three ratios, indicating possible pressures on profitability and operational efficiency in the most recent quarters.

The financial data demonstrates several notable trends and patterns over the analyzed periods.

Tax Burden

The tax burden ratio remains relatively stable across all periods from March 31, 2019, through September 30, 2023. The values consistently hover around 0.77 to 0.8, indicating a steady proportion of earnings retained or impacted by taxation without significant fluctuations.

Interest Burden

From March 31, 2019, onward, there is an observable improvement in the interest burden ratio. It starts around 0.71 to 0.74 in early 2019, declines to 0.64 to 0.67 mid-2020, but from 2021 onward, the ratio steadily increases, reaching approximately 0.92 by September 30, 2023. This suggests a reduction in the interest expense relative to earnings, reflecting potentially lower interest costs or improved earnings before interest.

EBIT Margin (%)

This margin shows a marked upward trajectory over the analyzed timeline. Starting from around 4.78% in early 2019, it gradually rises to a peak exceeding 16% by late 2022, before slightly tapering to about 12.78% at the third quarter of 2023. This growth indicates improved operational efficiency or profitability before interest and taxes over time, with a peak followed by a moderate decline in the most recent quarters.

Asset Turnover (ratio)

The asset turnover ratio exhibits a declining trend from early 2019, starting above 2.6 and decreasing to around 1.94 by the end of 2020. Beginning in 2021, there is a modest recovery, reaching nearly 2.14 by early 2023, but it declines again towards 1.61 by the third quarter of 2023. This pattern suggests variability in the company's efficiency in generating sales from its asset base, with periods of reduced efficiency followed by partial recovery and a subsequent slowdown.

Return on Assets (ROA %)

ROA follows an overall rising trend from early 2019 to late 2022, starting around 7%, dipping slightly mid-2020, but then increasing steadily to a peak of nearly 26% by the end of 2022. The measure declines in 2023 to approximately 14.66% by the third quarter. This metric indicates an improvement in asset profitability and the company’s ability to generate net income from its assets, although the recent decline in 2023 merits attention.

In summary, the company shows positive trends in profitability metrics, particularly EBIT margin and ROA, demonstrating improvements in operational profitability and asset returns from 2019 through 2022. Interest burden improvements complement this by indicating lower relative interest costs. However, asset turnover reveals mixed efficiency trends, with declines suggesting challenges in asset utilization at times, partially mitigated in some periods. The recent decline in both EBIT margin and ROA during 2023 suggests a potential slowdown or increased pressures impacting profitability and asset returns in the latest quarters.

Tax Burden

The tax burden ratio remained relatively stable from March 2019 through September 2023, fluctuating narrowly between 0.77 and 0.80. This indicates a consistent proportion of earnings retained after taxes over the observed periods, with no significant upward or downward trend.

Interest Burden

The interest burden ratio showed a notable improvement over time. Starting from approximately 0.71-0.74 during 2019, it declined sharply to around 0.64-0.67 in mid to late 2020, suggesting reduced interest expenses relative to earnings before interest and taxes. From 2021 onwards, the ratio improved significantly, rising gradually to stabilize between 0.92 and 0.95 by 2023. This upward trend indicates growing efficiency in managing interest expenses or reduced interest obligations over time.

EBIT Margin

EBIT margin demonstrated a clear upward trajectory across the periods analyzed. Beginning at about 4.78% to 5.56% in 2019, the margin enhanced steadily, reaching over 12% by early 2022 and peaking between 16% and 17% during late 2022 to early 2023. This positive progression suggests improved operating profitability and effective control over costs relative to revenue during the quarters under review. However, a slight decline is observed in the last two reported quarters (mid to late 2023), indicating potential emerging pressures on earnings before interest and tax.

Net Profit Margin

The net profit margin similarly exhibited a growth pattern throughout the periods. Starting near 2.66% to 3.17% in 2019, margins expanded steadily to peak close to 12% during 2022 and early 2023. This trend reflects enhanced overall profitability after all expenses, taxes, and interest, aligning with improvements in EBIT margin and interest burden. Nonetheless, a modest reduction is noticeable in the most recent quarters of 2023, suggesting a possible easing of profit growth momentum or rising costs.

Overall Analysis

The financial data indicates ongoing operational improvements and stronger profitability from 2019 through early 2023, as demonstrated by increasing EBIT and net profit margins coupled with a rising interest burden ratio (reflecting reduced interest impact). Tax burden remained stable, implying consistent tax treatment. The recent slight declines in profitability margins in late 2023 warrant attention to emerging cost or revenue pressures that could affect future earnings.