Edwards Lifesciences Corp. (NYSE:EW)

Analysis of the financial data reveals several notable trends in the company's performance and capital utilization over the five-year period ending in 2021.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrated an overall upward trajectory, starting at approximately 615 million US dollars in 2017 and increasing to roughly 1.47 billion US dollars by 2021. A marked increase is observed in 2019, reaching over 1 billion US dollars, followed by a decline in 2020, and then a significant rebound in 2021. This pattern indicates variability in profit generation with a strong recovery in the final year analyzed.

Cost of Capital

The cost of capital showed a gradual and slight increase over the period, moving from 15.27% in 2017 to 15.67% in 2021. This trend suggests a steady increase in the required return or risk associated with invested capital, potentially impacting investment decisions and valuation.

Invested Capital

Invested capital exhibited an upward trend from 2017 to 2020, increasing from approximately 2.86 billion US dollars to about 3.94 billion US dollars. However, in 2021, there was a slight decrease to roughly 3.79 billion US dollars. This may indicate a phase of capital expansion followed by a modest contraction or reallocation of assets.

Economic Profit

Economic profit reflected significant fluctuations. Starting at around 179 million US dollars in 2017, it increased notably to over 472 million in 2019, declined sharply to approximately 153 million in 2020, then surged to a high of about 874 million US dollars in 2021. This pattern correlates with the movements in NOPAT and suggests that despite rising costs of capital, the company enhanced value creation notably by 2021.

In summary, the company experienced growth in profitability and economic value creation over the analyzed period, despite some volatility in 2020. The steady increase in the cost of capital alongside fluctuating invested capital suggests a dynamic operating environment with strategic capital management. The strong recovery in 2021 highlights pronounced improvements in financial performance and value generation capabilities.

The financial data indicates variations and notable trends in profitability measures over the five-year period.

Net Income

Net income displayed an overall upward trend from 2017 through 2021. Starting at approximately 583.6 million US dollars in 2017, it increased to 722.2 million in 2018, followed by a significant rise to nearly 1.05 billion in 2019. Although there was a decline in 2020 to 823.4 million, the figure rebounded strongly in 2021, reaching a high of about 1.5 billion US dollars. This pattern suggests a robust profitability growth trajectory with a temporary setback in 2020.

Net Operating Profit After Taxes (NOPAT)

NOPAT also showed a general upward pattern in line with net income, beginning at approximately 615.1 million US dollars in 2017 and increasing to 704.3 million in 2018. It then rose sharply to about 1.05 billion in 2019 before declining to 768.5 million in 2020. Similar to net income, NOPAT recovered in 2021, reaching approximately 1.47 billion US dollars. The fluctuations in NOPAT largely mirror those in net income, indicating consistent operational profitability trends adjusted for taxes.

In summary, both net income and NOPAT experienced significant growth over the period, with a noticeable dip in 2020 likely influenced by external factors affecting profitability that year. The strong recovery in 2021 highlights resilience and an improved operating performance post-2020.

An analysis of the financial data over the five-year period reveals distinct trends in both income tax provision and cash operating taxes.

Income Tax Provision

The income tax provision shows significant fluctuation during the period. Initially, it starts at a relatively high value in 2017, then declines sharply in 2018. This is followed by an increase in 2019, a slight decrease in 2020, and a considerable rise again in 2021. Overall, the income tax provision does not establish a consistent upward or downward trend but rather exhibits volatility with a strong rebound in the final year observed.

Cash Operating Taxes

Cash operating taxes depict a generally increasing trend throughout the period. Starting from a moderate level in 2017, there is a considerable drop in 2018. Following this, a continuous rise is observed through 2019, 2020, and a significant increase in 2021. This pattern indicates growing cash tax outflows, especially pronounced in the latter years, suggesting either higher taxable income or changes in tax payment practices.

Comparative Observations

When comparing the two metrics, cash operating taxes remain consistently below income tax provisions in most years except for 2018 when cash operating taxes are notably higher. This divergence indicates potential differences in timing or recognition between the tax expense reported under accounting standards and the actual cash taxes paid. The growing gap in recent years could imply deferred tax liabilities or other tax-related timing differences.

Total reported debt & leases

The total reported debt and leases demonstrate a significant decrease from 1,103,939 thousand US dollars in 2017 to 676,404 thousand US dollars in 2018. After this sharp reduction, the values remain relatively stable with slight fluctuations, recorded as 678,800 thousand in 2019, 694,900 thousand in 2020, and a minor decrease to 690,300 thousand in 2021. This indicates a strategic reduction in debt levels followed by maintenance of a consistent debt position over the subsequent years.

Stockholders’ equity

Stockholders' equity exhibits a consistent upward trend throughout the observed period. Beginning at 2,956,200 thousand US dollars in 2017, equity grows moderately to 3,140,400 thousand in 2018. Thereafter, a more pronounced increase is observed with figures reaching 4,148,300 thousand in 2019, 4,574,300 thousand in 2020, and a significant rise to 5,835,900 thousand in 2021. This steady increase suggests ongoing equity strengthening, potential reinvestment of earnings, or capital raising activities enhancing the financial base of the entity.

Invested capital

Invested capital shows an initial slight increase from 2,855,739 thousand US dollars in 2017 to 2,904,204 thousand in 2018, followed by a notable increase to 3,697,400 thousand in 2019 and further to 3,937,900 thousand in 2020. However, a decrease is evident in 2021, with invested capital reducing to 3,791,600 thousand. This pattern indicates growing investment in assets or operations until 2020, with a partial reduction or divestment in 2021, reflecting a possible shift in investment strategy or asset base optimization.

Economic Profit

The economic profit showed a significant upward trend over the analyzed period. Starting at 178,906 thousand US dollars in 2017, it increased steadily to 251,800 thousand in 2018 and further to 472,861 thousand in 2019. A notable decline occurred in 2020, with economic profit dropping to 153,043 thousand US dollars. However, in 2021, there was a sharp recovery and substantial growth, reaching 874,109 thousand US dollars, the highest value in the period observed.

Invested Capital

Invested capital experienced a general upward movement from 2017 through 2020. The value rose from 2,855,739 thousand US dollars in 2017 to 2,904,204 thousand in 2018 and sharply increased to 3,697,400 thousand in 2019. This was followed by a further increase to 3,937,900 thousand in 2020. In 2021, invested capital slightly decreased to 3,791,600 thousand US dollars, marking a minor reversal after several years of growth.

Economic Spread Ratio (%)

The economic spread ratio exhibited considerable volatility during the period. It started at 6.26% in 2017 and increased steadily to 8.67% in 2018 and further to 12.79% in 2019. There was a significant drop in 2020, where the ratio fell to 3.89%. In 2021, the economic spread ratio surged dramatically to 23.05%, representing a substantial improvement and the highest ratio in the reviewed timeframe.

Summary of Trends and Insights

The data indicates an overall positive growth trajectory in economic profit from 2017 to 2021, notwithstanding the dip observed in 2020. This dip corresponds with a reduction in the economic spread ratio during the same year, suggesting a possible decrease in profitability or capital efficiency. The invested capital showed steady growth until 2020, with a slight decline in 2021, which may reflect adjustments in asset base or strategic reallocations.

The dramatic increase in both economic profit and economic spread ratio in 2021 highlights a significant improvement in returns relative to capital invested. This suggests enhanced operational efficiency, higher profitability, or both in 2021 as compared to previous years. The economic spread ratio particularly underscores improved value creation, indicating that the returns on invested capital substantially exceeded the cost of capital.

Overall, the analysis points to a company capable of increasing value and profitability over time, with a temporary setback in 2020 followed by a robust recovery and improvement in key economic metrics in 2021.

The financial data reveals several significant trends over the five-year period ending December 31, 2021. The company experienced overall growth in net sales with fluctuations in economic profit and economic profit margin, indicating varying levels of profitability relative to sales revenue.

Net Sales

Net sales increased steadily over the period, rising from $3,435,300 thousand in 2017 to $5,232,500 thousand in 2021. This reflects a consistent upward trend, with notable growth between 2019 and 2021. The increase suggests positive market demand and/or successful expansion strategies.

Economic Profit

Economic profit showed a less consistent pattern compared to net sales. It rose from $178,906 thousand in 2017 to $472,861 thousand in 2019, indicating improving profitability during this period. However, it declined sharply to $153,043 thousand in 2020 before rebounding strongly to $874,109 thousand in 2021. This fluctuation could reflect changes in operational efficiency, cost management, or external factors impacting profitability.

Economic Profit Margin

The economic profit margin followed a similar erratic pattern as economic profit. It increased from 5.21% in 2017 to a peak of 10.88% in 2019, then dropped significantly to 3.49% in 2020, aligning with the lower economic profit in that year. In 2021, it surged to 16.71%, the highest level in the dataset, indicating a marked improvement in profitability relative to sales. This suggests enhanced value creation and/or more efficient capital utilization in the most recent year.

In summary, while net sales demonstrated consistent growth, economic profit and its margin exhibited volatility, particularly with a notable dip in 2020. The strong recovery in 2021 with record profits and margins points to significant operational improvements or favorable market conditions driving profitability beyond revenue gains alone.