Edwards Lifesciences Corp. (NYSE:EW)

Net operating profit after taxes (NOPAT)

The net operating profit after taxes shows a fluctuating upward trend over the analyzed periods. Starting at approximately 615 million in 2017, it increased to over 1.46 billion by 2021, with a significant jump between 2020 and 2021. However, a notable dip occurred in 2020 compared to 2019, indicating a temporary reduction in profitability before recovery.

Cost of capital

The cost of capital remained relatively stable with a slight increasing trend, moving from 15.31% in 2017 to around 15.7% in 2021. This marginal increase suggests a consistent but slightly rising required return on invested capital.

Invested capital

The invested capital exhibited growth from approximately 2.86 billion in 2017 to a peak of nearly 3.94 billion in 2020, followed by a modest decline in 2021. The increasing trend until 2020 indicates expanding capital deployment to support operations or growth, with a slight reduction in the last year possibly reflecting optimization or divestiture.

Economic profit

Economic profit showed significant variability, initially increasing markedly from 178 million in 2017 to 472 million in 2019. This was followed by a sharp decline in 2020 to about 152 million, paralleling the dip in NOPAT. Notably, there was a strong recovery in 2021, with economic profit reaching its highest level at approximately 873 million. This pattern underscores fluctuations in value creation relative to the cost of capital, with overall improvements by the end of the period.

Summary

Overall, the financial data reflect a company experiencing growth in profitability and invested capital until 2019, interrupted by a setback in 2020 which may be attributable to external factors impacting earnings. The cost of capital exhibited minor upward pressure throughout. By 2021, both NOPAT and economic profit showed significant rebounds indicating improved operational efficiency and value generation. The slight decrease in invested capital in 2021, alongside increased economic profit, suggests more effective capital usage.

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.

The financial data indicates notable trends in economic profit, invested capital, and economic spread ratio over the five-year period ending December 31, 2021.

Economic Profit

The economic profit exhibited a general increasing trend from 2017 through 2021, with some fluctuations. Initially, it rose from approximately $178 million in 2017 to about $251 million in 2018, and then nearly doubled to $472 million by 2019. However, there was a significant decline in 2020 to roughly $152 million, followed by a strong recovery and substantial increase to approximately $873 million in 2021. This pattern reflects increased profitability with a temporary setback in 2020.

Invested Capital

Invested capital showed a generally upward trajectory from 2017 through 2020, rising steadily from about $2.86 billion in 2017 to nearly $3.94 billion in 2020. However, there was a slight decrease in 2021 to approximately $3.79 billion. This indicates continued investment and growth in capital assets until 2020, followed by a modest reduction in the last reported year.

Economic Spread Ratio

The economic spread ratio, which measures the return spread relative to the cost of capital, improved significantly over the period. Starting at 6.23% in 2017, the ratio increased to 8.64% in 2018 and then sharply to 12.75% in 2019. In 2020, it decreased notably to 3.85%, mirroring the dip in economic profit. However, in 2021, the ratio surged to 23.02%, the highest in the period, indicating an exceptional enhancement in capital efficiency and value generation in that year.

In summary, after a strong growth phase in economic profit and economic spread ratio between 2017 and 2019, there was a contraction in 2020 which aligns with a reduction in economic spread ratio despite increasing invested capital. The rebound in 2021 saw economic profit and economic spread ratio reach peak levels, suggesting improved profitability and capital utilization despite a slight decline in invested capital. These trends highlight resilience and a significant performance recovery following the 2020 disruption.

The analysis of the annual financial data reveals several significant trends over the five-year period.

Net Sales

Net sales exhibit a steady upward trajectory, increasing from approximately $3.44 billion in 2017 to $5.23 billion in 2021. This consistent growth suggests robust demand and an expanding market presence.

Economic Profit

Economic profit shows notable variability. It rose markedly from about $178 million in 2017 to a higher peak near $472 million in 2019. However, it sharply declined to roughly $152 million in 2020 before surging to its highest level of approximately $873 million in 2021. This fluctuation indicates periods of both constraint and exceptional value creation within the timeframe.

Economic Profit Margin

The economic profit margin follows a similar pattern to economic profit. Beginning at 5.18% in 2017, it climbs to 10.85% in 2019, falls back to 3.46% in 2020, and then advances significantly to 16.68% in 2021. This trend reflects increasing efficiency and profitability relative to sales, especially notable in the most recent year.

Overall, the data indicate strong top-line growth accompanied by fluctuations in value creation metrics. The steep decline in economic profit and margin in 2020 may reflect adverse circumstances or increased costs during that year, while the substantial rebound in 2021 points to effective management responses and improved operational performance.