Fidelity National Information Services Inc. (NYSE:FIS)

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited a declining trend from 2018 to 2020, falling from $889 million to $325 million. There was a notable improvement in 2021, with NOPAT increasing to $524 million. However, in 2022, the figure deteriorated significantly, resulting in a substantial negative value of -$17,009 million, indicating a major operational loss or extraordinary expense in that year.

Cost of Capital

The cost of capital showed a moderate downward trend over the five-year period. Starting at 10.62% in 2018, it slightly increased to 10.73% in 2019, then decreased steadily to 9.3% by 2022. This gradual reduction suggests possibly lower risk perception or cheaper capital costs over time.

Invested Capital

Invested capital experienced a sharp increase from $22,222 million in 2018 to $75,448 million in 2019, remaining relatively stable through 2020 and 2021, with figures of $75,049 million and $73,331 million respectively. By 2022, invested capital declined to $52,862 million, indicating divestments, asset disposals, or other capital reductions after the peak years.

Economic Profit

The economic profit was negative throughout the period, beginning at -$1,470 million in 2018 and worsening sharply to -$7,518 million in 2019. It remained at similar negative levels in 2020 (-$7,495 million) and slightly improved in 2021 to -$6,441 million. However, in 2022, economic profit declined further to a significant negative value of -$21,922 million, reflecting considerable value destruction and suggesting that returns failed to cover the cost of capital for the company during these years, particularly in 2022.

Overall Insights

The analyzed data indicates persistent challenges in generating operational profitability and economic value over the reported years. Although there was a brief recovery in NOPAT in 2021, the sharp decline in 2022 highlights an exceptional adverse event or period. The cost of capital trends downward, but this was insufficient to offset operating losses. Invested capital peaked in 2019-2021, then reduced markedly in 2022, possibly as a response to financial performance pressures. The continual negative economic profit underscores ongoing difficulties in achieving returns above the cost of capital.

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 financial analysis of the data reveals several notable trends over the five-year period ending in 2022.

Economic Profit

The economic profit exhibits a consistently negative trend, indicating that the company has not generated returns above its cost of capital during this period. Starting from a loss of 1,470 million US dollars in 2018, the economic profit significantly worsened in 2019 to a loss of 7,518 million US dollars. This loss remained relatively stable in 2020 and 2021, with values of -7,495 million and -6,441 million respectively. However, there was a dramatic increase in the negative economic profit in 2022, reaching -21,922 million US dollars, signaling a substantial deterioration in value creation.

Invested Capital

The invested capital shows an overall increasing trend from 2018 to 2021, growing from 22,222 million US dollars to a peak of 75,448 million in 2019, then slightly decreasing to 73,331 million in 2021. However, in 2022, there is a significant reduction in invested capital down to 52,862 million US dollars, suggesting possible divestitures, asset sales, or impairment write-downs.

Economic Spread Ratio

The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, has been persistently negative throughout the period. The spread worsened from -6.62% in 2018 to nearly -10% in 2019 and 2020, then slightly improved to -8.78% in 2021. In 2022, the spread ratio sharply declined to -41.47%, reflecting a drastic drop in profitability relative to the cost of capital. This correlates with the sharp increase in negative economic profit for the same year.

Overall, the data indicates a challenging financial environment with declining profitability and value creation over the years. The drastic changes in 2022, both in economic profit and economic spread ratio, highlight significant operational or market difficulties impacting the company's financial performance.

Adjusted Revenue

The adjusted revenue has shown a consistent upward trend over the five-year period. Starting at $8,347 million in 2018, it increased steadily each year, reaching $14,527 million by 2022. This represents significant revenue growth, indicating expanding business operations or increased sales over time.

Economic Profit

Economic profit has been negative throughout the observed period, reflecting losses when considering the cost of capital. In 2018, the economic profit was -$1,470 million, which worsened sharply in 2019 to -$7,518 million. It remained substantially negative in the subsequent years, slightly improving to -$6,441 million in 2021 before deteriorating further in 2022 to -$21,922 million. This indicates increasing economic losses, particularly severe in the last recorded year.

Economic Profit Margin

The economic profit margin followed a similar trend to economic profit, being negative throughout the period. It fell from -17.62% in 2018 to a low of -72.32% in 2019, with some improvement to -46.37% in 2021. However, in 2022 the margin drastically declined to -150.91%, reflecting the heightened losses relative to revenue and suggesting that the company's returns were far below the cost of invested capital during that year.

Summary Insights

While revenue growth is a positive indicator of business expansion, the persistent and deepening negative economic profit and margin highlight challenges in achieving value creation or acceptable returns over the cost of capital. The substantial deterioration in economic profit and profitability margin in 2022 is particularly notable and may warrant further investigation into factors driving elevated losses despite increased revenue. This pattern suggests that operational or capital efficiency issues could be affecting overall financial performance adversely.