Fidelity National Information Services Inc. (NYSE:FIS)

The analysis of economic profit reveals a consistent failure to generate value above the cost of capital throughout the period from 2018 to 2022. Economic profit remained negative for all five years, indicating that the returns produced by the operating assets were insufficient to cover the required return on invested capital.

Net Operating Profit After Taxes (NOPAT)

A volatile and overall deteriorating trend is observed in NOPAT. From 2018 to 2020, NOPAT declined from US$ 889 million to US$ 325 million. Although a slight recovery to US$ 524 million occurred in 2021, the metric suffered a severe collapse in 2022, plummeting to a loss of US$ 17,009 million.

Invested Capital and Cost of Capital

Invested capital experienced a massive increase between 2018 and 2019, rising from US$ 22,222 million to US$ 75,448 million. This capital base remained relatively stable through 2021 before decreasing to US$ 52,862 million in 2022. Concurrently, the cost of capital demonstrated a gradual downward trend, decreasing from 12.20% in 2018 to 10.65% in 2022.

Economic Profit Dynamics

Economic profit shifted from a loss of US$ 1,821 million in 2018 to a significantly deeper loss of US$ 8,760 million in 2019, a change primarily driven by the sharp expansion of the invested capital base without a corresponding increase in NOPAT. While losses stabilized and slightly narrowed between 2020 and 2021, the economic profit deteriorated sharply in 2022 to US$ -22,638 million, directly correlating with the substantial negative NOPAT recorded in that year.

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 performance from 2018 to 2022 is characterized by consistently negative economic profit and a deteriorating economic spread ratio, indicating that the cost of capital exceeded the returns generated on invested assets throughout the observed period.

Economic Profit

Economic profit remained negative over the five-year duration, demonstrating a continuous failure to create economic value. A significant decline is noted between 2018 and 2019, where the value dropped from -1,821 million USD to -8,760 million USD. While a marginal recovery trend was observed between 2020 and 2021, the period concluded with a severe contraction in 2022, reaching -22,638 million USD.

Invested Capital

Invested capital underwent a substantial increase between 2018 and 2019, rising from 22,222 million USD to 75,448 million USD. This capital base remained relatively stable through 2021, before experiencing a significant reduction to 52,862 million USD by the end of 2022.

Economic Spread Ratio

The economic spread ratio remained in negative territory for the entire period, confirming that the return on invested capital was consistently below the weighted average cost of capital. The ratio showed relative stability between -8.20% in 2018 and -10.24% in 2021. However, 2022 marked a critical downturn, with the ratio falling to -42.82%, reflecting a sharp decline in the efficiency of capital utilization and a widening gap between the cost of capital and the actual returns achieved.

The analysis of economic value added from 2018 to 2022 reveals a consistent failure to generate positive economic profit. Despite a steady and continuous increase in adjusted revenue, the organization operated at an economic loss throughout the entire five-year period, indicating that the returns on invested capital remained insufficient to cover the cost of capital.

Economic Profit Trends

Economic profit remained negative for the duration of the analyzed period. A sharp decline occurred between 2018 and 2019, with losses widening from -1.82 billion to -8.76 billion. Although a slight recovery trend was observed through 2021, where losses narrowed to -7.51 billion, the 2022 fiscal year experienced a severe downturn, with economic profit plummeting to -22.64 billion.

Revenue Growth Performance

Adjusted revenue demonstrated a consistent upward trajectory, increasing from 8.35 billion in 2018 to 14.53 billion in 2022. This growth indicates a successful expansion of top-line activities; however, the simultaneous decline in economic profit suggests that the capital required to support this growth yielded returns below the organization's cost of capital.

Economic Profit Margin Analysis

The economic profit margin exhibited extreme volatility and remained deeply negative. Following a deterioration from -21.82% in 2018 to -84.26% in 2019, the margin showed gradual improvement, reaching -54.07% by 2021. This positive momentum was abruptly reversed in 2022, when the margin dropped to -155.83%, representing the most significant erosion of value within the observed timeframe.