HCA Healthcare Inc. (NYSE:HCA)

The period between 2017 and 2021 demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) generally increased over the period, though with some variation. Simultaneously, the cost of capital exhibited an upward trend, while invested capital also increased consistently. These factors combined to produce a volatile pattern in economic profit.

NOPAT Trend

NOPAT increased from US$4,332 million in 2017 to US$5,865 million in 2018, representing a substantial gain. It remained relatively stable through 2019 at US$5,941 million before decreasing to US$5,607 million in 2020. A significant increase was then observed in 2021, with NOPAT reaching US$9,050 million.

Cost of Capital Trend

The cost of capital rose steadily from 14.43% in 2017 to 17.96% in 2021. The increase was not linear, with a larger jump occurring between 2017 and 2018 (2.47 percentage points) and a more moderate increase in subsequent years. This upward trend suggests increasing risk or changing market conditions impacting funding costs.

Invested Capital Trend

Invested capital showed consistent growth throughout the period, increasing from US$27,635 million in 2017 to US$36,837 million in 2021. This indicates ongoing investment in the business and expansion of its asset base.

Economic Profit Trend

Economic profit began at US$345 million in 2017 and increased to US$841 million in 2018. It then decreased to US$461 million in 2019 and turned negative in 2020, reaching -US$403 million. A substantial recovery occurred in 2021, with economic profit rising to US$2,434 million. The negative economic profit in 2020 suggests that the return on invested capital was less than the cost of capital during that year. The significant positive economic profit in 2021 indicates a strong return exceeding the cost of capital.

The interplay between NOPAT, cost of capital, and invested capital resulted in considerable fluctuations in economic profit. While NOPAT and invested capital generally increased, the rising cost of capital partially offset these gains, particularly in 2020. The substantial increase in NOPAT in 2021, coupled with a continued, though moderate, increase in the cost of capital, drove the significant improvement in economic profit observed in that year.

Net Income Attributable to HCA Healthcare, Inc.

The net income shows a general upward trend over the analyzed period. Starting at 2,216 million US dollars in 2017, the figure increased significantly to 3,787 million in 2018, representing strong growth. There was a slight decline in 2019 to 3,505 million, followed by a moderate recovery in 2020 to 3,754 million. Notably, the net income surged markedly in 2021, reaching 6,956 million US dollars, indicating a substantial increase and a possible improvement in operational efficiency or market conditions.

Net Operating Profit After Taxes (NOPAT)

The NOPAT values also exhibit a consistent upward trajectory with minor fluctuations. Beginning at 4,332 million US dollars in 2017, it rose steadily to 5,865 million in 2018 and slightly higher to 5,941 million in 2019. A small decrease occurred in 2020, with NOPAT declining to 5,607 million. However, a significant increase is evident in 2021, with NOPAT rising sharply to 9,050 million US dollars. This substantial growth in 2021 may reflect enhanced operational performance or effective cost management, contributing to improved profitability after taxes.

Provision for Income Taxes

The provision for income taxes exhibited a fluctuating pattern over the five-year period. Initially, there was a decline from 1,638 million US dollars in 2017 to 946 million in 2018. This was followed by an increase in 2019 to 1,099 million. In 2020, the provision slightly decreased to 1,043 million, but surged significantly in 2021 to 2,112 million US dollars, representing the highest level in the observed timeframe.

Cash Operating Taxes

Cash operating taxes showed a general upward trend despite some variability. The amount decreased from 1,829 million US dollars in 2017 to 1,319 million in 2018, then marginally declined again to 1,225 million in 2019. However, there was a notable increase in 2020 to 1,505 million, followed by a substantial rise in 2021 to 2,444 million US dollars, reaching the peak value for the period under review.

Comparative Analysis

Both the provision for income taxes and cash operating taxes demonstrated significant increases in 2021, more than doubling their respective lows in 2018 and 2019. The divergence in trends between 2017 and 2018 indicates an initial reduction phase before a strong upward movement. The cash operating taxes consistently remained higher than the provision for income taxes each year, suggesting a potential difference in the timing or recognition of tax expenses compared to actual tax payments.

Total reported debt & leases

This liability metric showed a generally stable pattern throughout the observed periods, fluctuating slightly but remaining within the range of approximately US$33 billion to US$37 billion. Specifically, the value decreased from US$34.8 billion in 2017 to US$33.1 billion in 2020, followed by an increase to US$36.7 billion in 2021. This trend suggests a degree of active debt management, with a reduction during the 2018-2020 period and an increase in the most recent year.

Stockholders’ equity (deficit) attributable to HCA Healthcare, Inc.

The equity position exhibited a significant improvement from a negative value of US$6.8 billion in 2017 to nearly break-even at US$572 million in 2020, indicating a substantial repair of shareholders’ equity over this four-year span. However, in 2021, there was a reversal back to a negative equity balance of US$933 million, though this deficit was still less severe than the initial figures at the beginning of the period. This reflects volatility in retained earnings or other components influencing equity, as well as possible impacts of operational or non-operational factors on equity structure.

Invested capital

A steady and continuous increase in invested capital is evident across the five-year timeframe, rising from US$27.6 billion in 2017 to US$36.8 billion in 2021. This indicates ongoing investment activity and capital deployment in the business, suggesting expansion or renewal efforts. The upward trend is consistent year-over-year without any contractions or plateaus, signaling sustained capital growth.

The economic spread ratio exhibited considerable fluctuation between 2017 and 2021. Initial values indicated a positive spread, which decreased, became negative, and then increased substantially over the observed period.

Economic Spread Ratio

In 2017, the economic spread ratio was 1.25%. This increased significantly to 2.83% in 2018, representing a period of improved profitability relative to invested capital. A subsequent decline was observed in 2019, with the ratio falling to 1.37%. The year 2020 saw a negative economic spread ratio of -1.17%, indicating that returns on invested capital were insufficient to cover the cost of that capital. A substantial recovery occurred in 2021, with the ratio rising to 6.61%, the highest value within the analyzed timeframe.

The economic spread ratio’s movement correlates with the changes in economic profit. The negative economic spread in 2020 aligns with the reported economic loss of US$403 million for that year. Conversely, the significant positive spread in 2021 corresponds with the substantial economic profit of US$2,434 million.

Invested Capital

Invested capital consistently increased throughout the period, moving from US$27,635 million in 2017 to US$36,837 million in 2021. This growth in invested capital occurred alongside the fluctuations in economic profit and the economic spread ratio, suggesting that increases in capital deployment did not consistently translate into proportional increases in economic returns.

The observed volatility in the economic spread ratio suggests sensitivity to underlying economic conditions or company-specific factors impacting profitability and capital efficiency. The substantial improvement in 2021 warrants further investigation to determine the drivers of this positive shift and its sustainability.

The economic profit margin exhibited considerable fluctuation between 2017 and 2021. Initial values indicated positive economic profit, followed by a period of negative economic profit, and a subsequent strong recovery. Revenues demonstrated a consistent upward trend throughout the analyzed period.

Economic Profit Margin

The economic profit margin began at 0.79% in 2017, increasing to a peak of 1.80% in 2018. A decline was then observed in 2019, with the margin falling to 0.90%. The most significant shift occurred in 2020, where the margin became negative at -0.78%. A substantial recovery followed in 2021, with the economic profit margin rising sharply to 4.14%. This indicates a significant improvement in the company’s ability to generate economic profit relative to its revenue in the most recent year.

Economic Profit

Economic profit mirrored the trend in the economic profit margin. It increased from US$345 million in 2017 to US$841 million in 2018. A decrease to US$461 million was noted in 2019, followed by a loss of US$403 million in 2020. The final year, 2021, saw a substantial increase to US$2,434 million, aligning with the improved economic profit margin.

Revenues

Revenues increased steadily throughout the period, from US$43,614 million in 2017 to US$58,752 million in 2021. This consistent growth in revenue occurred alongside the fluctuating economic profit margin, suggesting that revenue growth alone does not guarantee economic profitability. The largest year-over-year revenue increase occurred between 2020 and 2021.

The divergence between revenue growth and economic profit margin highlights the importance of considering factors beyond revenue when assessing financial performance. The negative economic profit margin in 2020 suggests that, despite increased revenues, the cost of capital or operational expenses were not adequately covered. The substantial improvement in 2021 indicates a positive shift in the relationship between revenue, costs, and capital employed.