Edwards Lifesciences Corp. (NYSE:EW)

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated an overall upward trend during the period analyzed. Starting at approximately $615 million in 2017, it increased to over $704 million in 2018 and further to around $1.05 billion in 2019. Despite a decline in 2020 to approximately $768 million, the figure rebounded strongly in 2021, reaching about $1.47 billion. This pattern indicates some volatility, particularly in 2020, but reflects substantial growth over the five-year span.

Cost of Capital

The cost of capital exhibited a gradual increase over the period, moving from 15.12% in 2017 to 15.52% in 2021. Although the changes are relatively minor, this upward trajectory suggests a slight increase in the required return expectations or risk associated with the company's invested capital.

Invested Capital

Invested capital rose steadily from approximately $2.86 billion in 2017 to around $2.9 billion in 2018. There was a more pronounced increase in 2019, reaching nearly $3.7 billion, followed by a further rise to about $3.94 billion in 2020. However, in 2021, invested capital decreased somewhat to approximately $3.79 billion. This movement suggests that while the company expanded its asset base significantly until 2020, it slightly reduced invested capital in the last year under review.

Economic Profit

Economic profit showed notable fluctuations. It increased from about $183 million in 2017 to $256 million in 2018 and then to $479 million in 2019, indicating improving value creation. Conversely, there was a substantial decline in 2020 to around $159 million, but this was followed by a significant recovery in 2021 with economic profit reaching approximately $880 million, the highest in the period. The trends in economic profit reflect changes in both profitability and capital costs, highlighting the impact of operational results and invested capital efficiency on overall value creation.

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 Trends

The economic profit exhibited a generally positive trajectory with fluctuations over the observed periods. Starting at 183,167 thousand USD in 2017, it increased substantially to 256,221 thousand USD in 2018 and further rose significantly to 478,507 thousand USD in 2019. However, in 2020, economic profit decreased sharply to 159,061 thousand USD, reflecting a noteworthy downturn. This was followed by a remarkable recovery in 2021, where economic profit surged to 879,923 thousand USD, reaching the highest value across all periods.

Invested Capital Patterns

Invested capital showed a steady upward trend from 2017 through 2020. It rose from 2,855,739 thousand USD in 2017 to 2,904,204 thousand USD in 2018, then to 3,697,400 thousand USD in 2019 and peaked at 3,937,900 thousand USD in 2020. In 2021, there was a slight decrease to 3,791,600 thousand USD, indicating a modest contraction after several years of growth.

Economic Spread Ratio Developments

The economic spread ratio demonstrated significant variability throughout the period. It increased from 6.41% in 2017 to 8.82% in 2018, followed by a further rise to 12.94% in 2019, indicating improving returns relative to the cost of capital. However, the ratio fell sharply to 4.04% in 2020, signaling a decline in economic efficiency. In 2021, the economic spread ratio dramatically improved to 23.21%, the highest recorded value in the series, suggesting a strong enhancement in the profitability spread.

Overall Insights

The data reveals that while invested capital steadily increased until 2020 before a slight reduction in 2021, economic profit and the economic spread ratio experienced more pronounced fluctuations. The decline in 2020 across both economic profit and spread ratio may reflect adverse conditions or operational challenges, while the strong recovery and record-high levels in 2021 indicate a substantial improvement in economic performance and capital efficiency. This suggests a resilient business model capable of rebounding from setbacks and achieving enhanced economic returns.

Economic Profit

The economic profit exhibited a generally increasing trend over the five-year period, starting at 183,167 thousand US dollars in 2017 and peaking at 879,923 thousand US dollars by the end of 2021. The metric displayed substantial growth, especially notable from 2019 to 2021, despite a significant dip in 2020 to 159,061 thousand US dollars. This indicates fluctuating but overall expanding profitability beyond the cost of capital.

Net Sales

Net sales showed consistent growth throughout the period under review. Beginning at 3,435,300 thousand US dollars in 2017, sales increased yearly to reach 5,232,500 thousand US dollars in 2021. The growth trajectory is steady without any periods of decline, signifying sustained revenue expansion and increasing market demand or successful sales strategies.

Economic Profit Margin

The economic profit margin followed a somewhat volatile pattern, aligning with the fluctuations in economic profit. The margin increased from 5.33% in 2017 to 11.01% in 2019, dropped sharply to 3.63% in 2020, then surged to a high of 16.82% in 2021. This suggests that while profitability relative to sales was affected in 2020, likely due to extraordinary factors, the company achieved significantly improved profit efficiency by 2021.

Overall Analysis

Despite a setback in 2020, the company demonstrated robust growth in both economic profit and net sales over the five years. The recovery and improvement in economic profit margin by 2021 particularly highlight enhanced value creation and operational efficiency. The data suggest that the company effectively managed profitability relative to invested capital while expanding sales, reflecting strong financial health and positive operational leverage in the later years.