Edwards Lifesciences Corp. (NYSE:EW)

Analysis of the financial data reveals several important trends over the period from 2017 to 2021. The net operating profit after taxes (NOPAT) demonstrates a general upward trajectory, reflecting growth in operational profitability. Beginning at $615,066 thousand in 2017, NOPAT increased steadily to $1,050,298 thousand in 2019, before experiencing a decline in 2020 to $768,464 thousand, likely influenced by extraordinary circumstances in that year. It then rebounded markedly in 2021, surpassing previous highs to reach $1,468,252 thousand.

The cost of capital shows a slight but consistent increase over the five-year span, moving from 15.27% in 2017 to 15.67% in 2021. This suggests a marginal increase in the firm’s required rate of return or risk perception over time.

The invested capital exhibits growth from $2,855,739 thousand in 2017 to a peak of $3,937,900 thousand in 2020. There is a minor decline in 2021 to $3,791,600 thousand, indicating a small reduction in the capital base after a period of expansion.

Economic profit, which measures value creation after accounting for the cost of capital, displays considerable volatility. It rose significantly from $178,996 thousand in 2017 to $472,980 thousand in 2019, declined sharply in 2020 to $153,170 thousand corresponding to the reduction in NOPAT and the high invested capital level that year, and then surged greatly in 2021 to $874,232 thousand, indicating robust value creation.

Summary of trends

The operational profitability (NOPAT) followed a generally positive trend with a dip in 2020 but a strong recovery in 2021.

The slight increase in the cost of capital suggests stable yet rising capital costs or investor expectations.

Invested capital grew significantly until 2020 with a slight pullback in 2021.

Economic profit variability reflects the combined effects of fluctuating profits and capital costs, with substantial value creation achieved by 2021.

Overall, the data points to a company that expanded its capital base and recovered from operational challenges in 2020, resulting in enhanced profitability and economic profit by 2021, despite a modest increase in capital costs.

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 shows a general trend of growth over the analyzed period with fluctuations. Starting at 178,996 thousand US dollars in 2017, it increased significantly to 251,893 thousand in 2018 and nearly doubled to 472,980 thousand in 2019. However, there was a notable decline in 2020 to 153,170 thousand. In 2021, the economic profit rebounded strongly, reaching its highest value of 874,232 thousand, indicating a substantial improvement in profitability.

Invested Capital

The invested capital increased steadily from 2,855,739 thousand US dollars in 2017 to a peak of 3,937,900 thousand in 2020. Thereafter, it slightly decreased to 3,791,600 thousand in 2021. This gradual increase over most years suggests ongoing investments in assets or operations, although the decline in 2021 may reflect asset disposals or capital efficiency improvements.

Economic Spread Ratio

The economic spread ratio experienced significant variability. It rose from 6.27% in 2017 to 8.67% in 2018 and further increased sharply to 12.79% in 2019. In 2020, there was a considerable decline to 3.89%, indicating reduced economic returns relative to invested capital. In 2021, however, the ratio surged dramatically to 23.06%, reflecting a very strong economic performance relative to capital employed that year.

Overall Insights

The financial data reveals that despite fluctuations, there is an overall positive trend in the company’s economic profit, with 2021 marking a notable peak both in profit and economic spread ratio. The steady growth and subsequent slight decrease of invested capital suggest careful management of asset base, possibly with some optimization in the latest year. The pronounced spike in the economic spread ratio in 2021 indicates a significant enhancement in the returns achieved on the capital invested, which could be attributed to increased operational efficiency, higher profit margins, or other strategic improvements during that year.

Economic Profit

The economic profit exhibited considerable fluctuation over the analyzed period. It initially increased from 178,996 thousand US dollars in 2017 to 251,893 thousand US dollars in 2018, followed by a substantial rise to 472,980 thousand US dollars in 2019. However, in 2020, there was a marked decline to 153,170 thousand US dollars. The figure then sharply rebounded in 2021, reaching a peak of 874,232 thousand US dollars, significantly surpassing prior years.

Net Sales

Net sales showed a consistent upward trajectory throughout the period. From 3,435,300 thousand US dollars in 2017, sales increased steadily each year, reaching 5,232,500 thousand US dollars by 2021. This represents a robust growth trend with the largest year-over-year increase observed between 2020 and 2021.

Economic Profit Margin

The economic profit margin mirrored the pattern observed in economic profit, with variability across the years. Starting at 5.21% in 2017, it rose to 6.77% in 2018 and then peaked at 10.88% in 2019. A significant decline occurred in 2020, dropping to 3.49%. The margin then dramatically increased to 16.71% in 2021, indicating enhanced profitability relative to sales in that year.