Builders FirstSource Inc. (NYSE:BLDR)

Return on Assets (ROA)

Over the observed periods, the return on assets exhibited moderate fluctuations with an overall upward trend. Initially, ROA values ranged from approximately 6.8% to 7.51% during 2019 and 2020. A notable improvement occurred beginning in late 2020, with ROA steadily increasing from single-digit percentages to a peak of around 25.95% by the end of 2022. After reaching this peak, ROA experienced a decline in 2023, falling to approximately 14.66% by the most recent quarter. This pattern suggests that asset profitability improved significantly through 2021 and 2022 but faced some contraction subsequently.

Financial Leverage

Financial leverage demonstrated a clear declining trend from the first observed quarter in early 2019 through to early 2021, decreasing from over 5.0 times to below 2.0 times. Following this period, leverage stabilized in the range of approximately 2.0 to 2.5 times through the end of 2023, with minor incremental fluctuations. This reduction in leverage indicates a strategic move towards lower reliance on debt or overall liabilities relative to equity, resulting in a more conservative capital structure during recent years.

Return on Equity (ROE)

Return on equity experienced a significant decline from a high of 34.42% in early 2019 to a low near 9.58% in the first quarter of 2021, coinciding with the reduction in financial leverage. Subsequently, ROE showed a robust recovery throughout 2021 and 2022, achieving a peak exceeding 55% by the end of 2022, which represents the highest level observed during the period. However, in 2023, ROE declined steadily to approximately 34.37% by the most recent data point. The pattern implies that while profitability relative to shareholder equity was challenged during the early pandemic period, it rebounded strongly, supported by improved asset returns and efficient use of leverage, before moderating in the latest quarter.

Net Profit Margin

Over the observed periods, the net profit margin exhibits a general upward trend, starting at 2.84% and progressively increasing to a peak above 12% in late 2022. This reflects improving profitability on sales over several years. However, after reaching this high point, the margin shows a decline in 2023, dropping to around 9.1%. This decrease may indicate emerging pressures on cost control, pricing power, or revenue quality in the most recent quarters.

Asset Turnover

Asset turnover experiences a declining trend during the initial years, moving from approximately 2.39 downwards to around 1.94 by the end of 2020, suggesting a reduction in the efficiency of asset use to generate sales. Notably, there is a sharp drop to around 1.17 in early 2021, followed by a phase of gradual recovery where the ratio increases again to over 2.1 by late 2022. In 2023, the ratio falls again, signifying potential challenges in maintaining asset utilization efficiency.

Financial Leverage

Financial leverage decreases steadily from over 5.0 in early 2019 to below 2.0 by early 2021, indicating a significant reduction in reliance on debt financing or other liabilities relative to equity. Post-2021, leverage stabilizes around the 2.0 to 2.5 range, which may suggest a more conservative or balanced capital structure approach in the latest periods.

Return on Equity (ROE)

The ROE shows a strong declining trend from above 34% in 2019 to below 10% in early 2021, paralleling the drop in financial leverage and asset turnover during that time. After this trough, ROE improves markedly, peaking over 55% towards the end of 2022. This recovery coincides with improvements in net profit margin and asset turnover, as well as moderate financial leverage. However, ROE declines again through 2023, potentially due to the simultaneous decreases observed in profitability and asset utilization.

Tax Burden

The tax burden ratio remains relatively stable across the entire period, fluctuating narrowly around 0.77 to 0.80. This consistency suggests a stable tax environment or effective tax management strategies by the company without significant fluctuations in tax obligations relative to pre-tax earnings.

Interest Burden

The interest burden ratio exhibits a notable variation over time. Initially, it hovered near 0.73-0.74 through 2019 but then declined to a trough around 0.64-0.67 during the first three quarters of 2020, indicating higher interest expenses relative to earnings before interest and taxes. From late 2020 onward, it shows a marked recovery, increasing steadily up to approximately 0.92 by the third quarter of 2023. This trend points to improving interest coverage and possibly reduced interest expense or increased operating earnings mitigating the burden of interest costs.

EBIT Margin

The EBIT margin demonstrates a clear upward trend from early 2019 to late 2022, rising from about 5.08% to a peak near 16.81%. The margin peaks in 2022 before experiencing a moderate decline through 2023 to approximately 12.78%. This reflects improved operational profitability over the years, with a slight softening in recent quarters that may warrant further investigation into cost controls or revenue pressures.

Asset Turnover

Asset turnover shows a declining pattern from 2.39 in early 2019 down to a low near 1.17 in the first quarter of 2021. Following this low point, asset turnover improves steadily through 2022 and into early 2023, peaking around 2.14 before declining again to approximately 1.61 by the third quarter of 2023. This suggests varying efficiency in the utilization of assets to generate sales, with a significant dip corresponding to early 2021 and partial recovery thereafter but some recent contraction.

Financial Leverage

Financial leverage decreases significantly from over 5.0 in early 2019 to a low near 1.88 in early 2021, reflecting a reduction in the relative use of debt or other liabilities financing equity. Since early 2021, leverage increases moderately and stabilizes around 2.1 to 2.5 through 2023, indicating a more conservative capital structure than in the earlier period with some incremental increase in leverage but still well below prior highs.

Return on Equity (ROE)

ROE trends downward from 34.42% in early 2019 to a low of approximately 9.58% in early 2021, driven by lower asset turnover and diminishing financial leverage. From that point, ROE experiences a strong rebound, rising sharply to over 50% by late 2022 and remaining above 30% through 2023. This recovery aligns with improvements in operating profitability and increases in leverage, indicating enhanced value generation for shareholders following a challenging period.

Net Profit Margin

The net profit margin demonstrates a generally upward trend from 2019 through early 2023, beginning at approximately 2.84% in the first quarter of 2019 and reaching a peak around 12.2% at the end of 2022. The growth is gradual but consistent, with noticeable acceleration in 2021 and 2022. However, there is a modest decline observed in 2023, where the margin decreases from 12.1% to 9.1% by the third quarter, indicating some pressure on profitability during that period.

Asset Turnover

Asset turnover ratios show more variability and a less consistent trend compared to net profit margin. Initially, the ratio declines from 2.39 in early 2019 to a low of 1.17 around the first quarter of 2021. Following this trough, asset turnover improves steadily, reaching 2.14 by the end of 2022. In 2023, a decline occurs again, dropping to 1.61 by the third quarter. This pattern suggests varying efficiency in asset utilization over time, with stronger performance noted in late 2020 through 2022 before weakening in 2023.

Return on Assets (ROA)

The return on assets mirrors some aspects of the net profit margin and asset turnover trends but with more pronounced fluctuations. Starting at 6.8% in early 2019, ROA dips to approximately 5.35% during 2020, then experiences a significant increase starting in 2021, peaking at 25.95% near the end of 2022. This sharp rise reflects enhanced overall profitability and asset efficiency during this period. After reaching its peak, ROA decreases notably in 2023, falling to 14.66% by the third quarter, which signals a reduction in returns despite remaining above earlier years’ levels.

Summary of Trends

Overall, the financial performance trends reveal a period of growth in profitability and effectiveness in asset utilization from around 2020 to late 2022. Both net profit margin and ROA substantially improve during this timeframe, while asset turnover recovers from a previous decline. The subsequent weakening of all three metrics in 2023 suggests emerging challenges potentially impacting both profit margins and asset efficiency. The data indicates the need to monitor operational factors influencing these metrics closely to sustain improved financial outcomes.

The analysis of the quarterly financial ratios reveals several notable trends and shifts over the examined periods.

Tax Burden

The tax burden ratio has remained relatively stable throughout the periods, fluctuating slightly around 0.77 to 0.80. This indicates a consistent proportion of earnings retained after taxes, suggesting minimal changes in tax-related impacts on profits.

Interest Burden

Interest burden exhibited a declining trend from early 2019 through mid-2020, falling from approximately 0.73 to 0.64. Subsequently, it increased steadily, peaking near 0.95 by late 2021 and stabilizing slightly below this level through 2023. This pattern may indicate changes in interest expenses or debt levels affecting earnings before interest and taxes.

EBIT Margin

The EBIT margin showed an overall upward trajectory, beginning at just above 5% in early 2019 and reaching a peak around 16.8% by late 2022. After peaking, it experienced a moderate decline into 2023 but stayed significantly above the earlier years’ levels. This progression suggests improved operational efficiency or pricing power over time, despite some recent softening.

Asset Turnover

Asset turnover demonstrated a declining trend from early 2019 (around 2.39) through early 2021 (down to a low near 1.17), indicating slower revenue generation relative to asset base. From that point, it recovered gradually to about 2.14 by late 2022 before declining again in 2023. This volatility may reflect shifts in asset utilization or changes in sales volumes relative to assets.

Return on Assets (ROA)

ROA exhibited fluctuations with an initial moderate level near 7%, dipping to around 5.3%-5.5% in mid-2020, followed by a significant rise peaking above 25% in late 2022. It then declined somewhat in 2023 but remained well above early period levels. The substantial ROA increase aligns with improvements in EBIT margin, indicating enhanced profitability relative to asset base. The subsequent decline could suggest emerging challenges or normalization after strong performance.

Overall, the data indicate strengthening profitability and operational efficiency from 2019 through late 2022, driven by higher EBIT margins and improved returns on assets. However, asset utilization faced volatility, and recent periods show some easing in profitability metrics, potentially reflecting market or operational adjustments.

The financial performance over the analyzed quarters exhibits several notable trends in profitability and cost structure ratios.

Tax Burden

The tax burden ratio remains relatively stable throughout the periods, fluctuating marginally between 0.77 and 0.80. This consistent level suggests stable tax expense relative to earnings before taxes.

Interest Burden

The interest burden ratio shows a marked improvement starting around the first quarter of 2021, rising from the 0.64–0.75 range observed previously to a high of approximately 0.95 in the quarters following. This indicates a decrease in interest expenses relative to earnings before interest and taxes, enhancing overall profitability.

EBIT Margin

The EBIT margin demonstrates a clear upward trend, increasing from approximately 5% in early 2019 to a peak exceeding 16% in 2022. After reaching this peak, there is a moderate decline in 2023 quarters, though margins remain substantially higher than at the beginning of the period. This improvement indicates stronger operating performance and operational efficiencies realized over time.

Net Profit Margin

The net profit margin follows a similar pattern to EBIT margin, starting near 3% in 2019 and increasing steadily to over 12% in late 2022. Thereafter, a slight reduction occurs in 2023, but margins are still elevated compared to earlier periods. This margin enhancement reflects not only improved operating profit but also the benefits of reduced interest burdens and stable taxation.

Overall, the company has demonstrated significant improvement in profitability metrics, driven by both operational efficiencies and lower interest expenses. The stability in tax rates supports predictability in net earnings. Although a slight profit margin contraction appears in the most recent quarters of 2023, the financial results remain strong relative to the initial periods analyzed.