Fidelity National Information Services Inc. (NYSE:FIS)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes demonstrates a significant decline over the analyzed period. Starting from a positive value of 889 million in 2018, it decreased sharply to 325 million in 2020. Although there was a modest recovery to 524 million in 2021, the indicator turned negative in 2022, with a substantial loss of 17,009 million. This trend indicates deteriorating operational performance and profitability challenges in the most recent year.

Cost of Capital

The cost of capital shows a gradual decreasing trend, moving from 10.6% in 2018 to 9.28% in 2022. This steady decline may reflect improved market conditions, lower risk perceptions, or changes in the company’s capital structure, potentially easing financial burden related to capital costs over time.

Invested Capital

Invested capital experienced a sharp increase between 2018 and 2019, rising from 22,222 million to 75,448 million, after which it remained relatively stable around 73,000 to 75,000 million in the subsequent years until 2021. However, in 2022, there was a notable decrease to 52,862 million. Such fluctuations indicate significant changes in the company's asset base or capital allocation strategies during the period under review.

Economic Profit

The economic profit has been consistently negative throughout the entire period, indicating value destruction rather than creation. Although the losses fluctuated, the trend points towards worsening performance, culminating in a dramatic decline in 2022 with a loss of 21,915 million. This suggests that the firm's returns on invested capital failed to cover the cost of capital, raising concerns about overall economic profitability.

Net earnings (loss) attributable to common stockholders

From 2018 through 2021, net earnings displayed a significant downward trend. Beginning at 846 million USD in 2018, earnings decreased sharply to 298 million USD in 2019 and further to 158 million USD in 2020. A partial recovery occurred in 2021, with net earnings increasing to 417 million USD. However, 2022 saw a dramatic reversal, with net earnings recording a substantial loss amounting to -16,720 million USD, indicating a severe deterioration in profitability during that year.

Net operating profit after taxes (NOPAT)

NOPAT followed a pattern similar to net earnings over the same period. Starting at 889 million USD in 2018, NOPAT declined to 578 million USD in 2019 and further to 325 million USD in 2020. An improvement occurred in 2021, with NOPAT rising to 524 million USD. In 2022, NOPAT experienced a significant negative swing, registering a loss of -17,009 million USD, closely mirroring the net earnings loss and highlighting operational challenges impacting the company drastically in that year.

Overall insights

The data reveal a weakening profitability trend from 2018 to 2020, followed by some operational recovery in 2021. The extreme losses recorded in 2022 suggest extraordinary events or impairments that severely affected financial performance. Both net earnings and NOPAT demonstrate a high correlation in their trajectory, underscoring consistent operational and financial difficulties particularly in the final year observed.

Provision for income taxes

The provision for income taxes exhibited a notable fluctuation over the analyzed years. Initially, there was a significant decline from 208 million US dollars in 2018 to 100 million in 2019, followed by a slight decrease to 96 million in 2020. However, from 2020 onwards, the provision increased sharply to 371 million in 2021 and slightly further to 377 million in 2022. This pattern indicates a period of reduced tax obligations or accounting adjustments in the middle years, followed by a substantial rise in tax provisions in the most recent years.

Cash operating taxes

Cash operating taxes demonstrated a variable upward trend with some fluctuations. The amount decreased from 389 million in 2018 to 290 million in 2019, then rebounded to 381 million in 2020. After 2020, there was a significant increase to 508 million in 2021, and this upward trajectory accelerated sharply to 962 million in 2022. This progression suggests increasing cash tax outflows in recent years, which may reflect growing taxable income or changes in tax payment schedules.

Over the observed period, the total reported debt and leases displayed a significant increase from 2018 to 2019, rising from approximately 9.4 billion to 20.8 billion US dollars. This level remained relatively stable through to 2022, fluctuating slightly but staying near the 20.5 billion mark.

The total stockholders’ equity exhibited a sharp growth from 2018 to 2019, more than quadrupling from just over 10.2 billion to nearly 49.4 billion US dollars. However, this equity value began to decline gradually after 2019, decreasing to approximately 47.3 billion in 2021, before falling more substantially to around 27.2 billion by the end of 2022.

Invested capital followed a somewhat similar trend as the debt figures, showing a substantial rise from 22.2 billion in 2018 to a peak of 75.4 billion in 2019. Following that peak, invested capital remained relatively steady around 73.3 to 75.0 billion through 2020 and 2021 but then saw a marked decrease to approximately 52.8 billion in 2022.

Overall, the data suggest a period of significant capital expansion and leverage increase around 2019, followed by a phase of declining equity and invested capital starting in 2021 and continuing through 2022. This pattern may indicate strategic changes in capital structure or operational adjustments during the latter years of the period analyzed.

The analysis of the financial data reveals significant fluctuations and a concerning trend in economic profit, invested capital, and economic spread ratio over the five-year period.

Economic Profit

The company reported negative economic profit throughout the period, indicating an ongoing inability to generate returns above the cost of capital. Although economic profit improved from -1467 million US$ in 2018 to -7507 million US$ in 2019, this was short-lived. From 2019 through 2021, the values were relatively stable but remained deeply negative, around -6400 to -7500 million US$. In 2022, economic profit declined sharply to -21915 million US$, signaling a substantial deterioration in profitability relative to invested capital and cost of capital.

Invested Capital

Invested capital increased markedly from 22222 million US$ in 2018 to over 75000 million US$ in 2019 and 2020. After remaining relatively stable through 2021, invested capital declined to 52862 million US$ in 2022. This reduction, following a period of significant growth, could reflect asset disposals, impairments, or strategic shifts in capital allocation.

Economic Spread Ratio

The economic spread ratio was consistently negative during the period, underscoring that returns on capital were below the cost of capital. The negative spread deepened notably in 2022, plummeting from approximately -9% in prior years to -41.46%. This drastic worsening indicates an accelerated decline in return rates relative to capital costs, which parallels the steep drop in economic profit recorded for the same period.

Overall, the data illustrates persistent economic underperformance, with a critical downturn in 2022. The combination of sharply negative economic profit and economic spread, alongside a significant contraction in invested capital, suggests underlying challenges in value creation and capital efficiency during the most recent reporting year.

Adjusted Revenue

The adjusted revenue demonstrates a consistent upward trajectory over the five-year period. Beginning at approximately 8.3 billion USD in 2018, it increased steadily each year, reaching about 14.5 billion USD by the end of 2022. This indicates positive growth in the company's revenue base.

Economic Profit

The economic profit figures reveal persistent negative values throughout the period, indicating ongoing economic losses. In 2018, economic profit was around -1.5 billion USD, deteriorating sharply in 2019 and 2020 to roughly -7.5 billion USD. Although there was a slight improvement in 2021 to approximately -6.4 billion USD, the figure worsened substantially in 2022, plunging to nearly -22 billion USD. This pattern suggests increasing economic inefficiency or higher costs relative to profitability, despite rising revenues.

Economic Profit Margin

The economic profit margin aligns with the economic profit trend, consistently showing negative percentages that reflect losses relative to revenue. Starting from -17.58% in 2018, the margin declined drastically to about -72% in 2019 and remained deeply negative through 2020 and 2021 at approximately -59% and -46% respectively. By 2022, this metric deteriorated significantly to nearly -151%, indicating a severe decline in profitability performance as losses outpaced revenue growth considerably.

Overall Analysis

While the company shows healthy revenue growth year-over-year, the economic profit and its margin indicate worsening profitability and economic loss, especially notable in 2022. The increasing negative economic profit margin suggests that the company's costs or capital charges have escalated disproportionately compared to its revenue, potentially reflecting operational inefficiencies, higher expenses, or substantial investment costs. This divergence between rising revenues and declining profitability metrics warrants a detailed examination of cost management and capital allocation strategies to address the growing economic loss.