IQVIA Holdings Inc. (NYSE:IQV)

The financial data reveals several key trends in the company's performance over the five-year period from the end of 2018 through 2022.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a gradual increase from 444 million US dollars in 2018 to 449 million in 2019, followed by a substantial rise to 718 million in 2020. This upward momentum continued sharply in 2021, peaking at 1,678 million US dollars, before experiencing a decline to 1,268 million in 2022. Overall, NOPAT has increased significantly over the five years, indicating improved operating profitability, albeit with some volatility in the most recent year.

Cost of Capital

The cost of capital exhibited a steady upward trend, rising from 14.18% in 2018 to 15.2% in 2022. This gradual increase reflects a growing expense of financing and capital investment, which potentially puts pressure on returns and may impact investment decisions.

Invested Capital

Invested capital showed a modest increase over the period, starting at 20,458 million US dollars in 2018 and rising incrementally to 21,926 million in 2022. The stable growth in invested capital suggests ongoing resource allocation toward maintaining or expanding the company’s asset base.

Economic Profit

Economic profit remained negative throughout the five years, indicating that the company's returns did not consistently exceed its cost of capital. The losses narrowed slightly from -2,457 million US dollars in 2018 to -2,315 million in 2020, then improved further in 2021 to -1,506 million. However, a reversal occurred in 2022, with economic profit deteriorating again to -2,066 million. This pattern suggests that while operational profitability improved, it was insufficient to surpass the cost of capital, especially in the most recent year.

In summary, although the company has demonstrated significant improvements in operating profit, particularly between 2020 and 2021, the rising cost of capital and stable invested capital have constrained the generation of positive economic profit. The negative economic profit throughout the period highlights ongoing challenges in creating shareholder value above the cost of capital, with some improvement noted up to 2021 but regression in 2022.

Net Income Attributable to IQVIA Holdings Inc.

The net income exhibited a fluctuating trend over the reviewed period. Starting at 259 million US dollars in 2018, there was a decline to 191 million in 2019. This was followed by an increase to 279 million in 2020. The year 2021 marked a significant spike in net income, reaching 966 million, the highest during the period. In 2022, net income continued to rise, although at a slower pace, reaching 1,091 million US dollars.

Net Operating Profit After Taxes (NOPAT)

NOPAT showed a general upward trajectory with some variability. It started at 444 million US dollars in 2018 and remained relatively stable in 2019 with a marginal increase to 449 million. A more pronounced growth occurred in 2020, with NOPAT rising to 718 million. In 2021, the figure more than doubled compared to the previous year, reaching 1,678 million. However, in 2022, NOPAT decreased to 1,268 million, reflecting a contraction compared to 2021 but remaining significantly higher than the values before 2021.

Overall Observations

The data indicates that both net income and NOPAT experienced substantial growth particularly in 2021. However, while net income maintained an upward trend into 2022, NOPAT showed a decrease in the last year. This divergence may suggest changes in operational efficiency or tax impact in the most recent period. The significant increase in 2021 could be indicative of strong operational performance or other one-time factors contributing to profitability during that year.

The analysis of the income tax expense and cash operating taxes over the five-year period reveals a clear upward trend for both financial items.

Income Tax Expense

The income tax expense exhibited fluctuations in the initial years but showed a significant increase toward the end of the period. Starting at 59 million USD in 2018, the expense nearly doubled in 2019 to 116 million USD, then decreased to 72 million USD in 2020. However, there was a notable rise in subsequent years, reaching 163 million USD in 2021 and peaking at 260 million USD by the end of 2022. This pattern indicates increasing tax liabilities, especially in the last two years under review.

Cash Operating Taxes

Cash operating taxes also followed an upward trajectory, albeit with more stability year-over-year. From 340 million USD in 2018, the amount increased modestly to 356 million USD in 2019, followed by a slight dip to 334 million USD in 2020. Afterwards, there was a steady increase, with cash taxes rising to 390 million USD in 2021 and further climbing to 469 million USD in 2022. This steady growth highlights increasing cash tax payments, which may reflect higher taxable income or changes in tax legislation or business operations.

Overall, both the income tax expense and cash operating taxes have trended upward over the five-year span, with the largest increases occurring in the most recent years. This suggests a rising tax burden, which could impact net profitability and cash flows. The disparity between the income tax expense and cash operating taxes in absolute terms may also suggest timing differences or adjustments in deferred tax accounting.

Total reported debt & leases

The total reported debt and leases show a general increasing trend over the observed period. Starting at 11,620 million US dollars at the end of 2018, the amount increased steadily, reaching 13,351 million US dollars by the end of 2022. Despite a slight decrease in 2021 compared to 2020, the overall trajectory indicates a rising debt and lease liability commitment.

Equity attributable to IQVIA Holdings Inc.’s stockholders

Equity attributable to the company’s stockholders exhibits a declining pattern through the period. Beginning at 6,714 million US dollars in 2018, equity decreased to 6,003 million in 2019 and remained relatively flat through 2020 and 2021 around the 6,000 million mark. By the end of 2022, equity further dropped to 5,765 million dollars. This downward trend suggests a reduction in net assets available to shareholders over these years.

Invested capital

Invested capital shows a modest but consistent upward trend from 20,458 million US dollars at the end of 2018 to 21,926 million US dollars by the end of 2022. This increase is gradual and steady, reflecting a growth in the total sources of funding, including both debt and equity, utilized by the company in its operations.

The analysis of the annual financial data reveals several notable trends concerning economic profit, invested capital, and economic spread ratio over the five-year period.

Economic Profit

Economic profit shows a persistent negative value throughout the period, indicating that the company consistently failed to generate returns exceeding its cost of capital. The negative economic profit fluctuated, starting at -2457 million USD in 2018 and reaching its least negative point at -1506 million USD in 2021. However, this improvement was followed by a deterioration in 2022, where economic profit declined again to -2066 million USD. This pattern suggests some variability in value creation efforts, with temporary improvement that did not sustain into the latest year.

Invested Capital

Invested capital exhibited a gradual upward trend from 20458 million USD in 2018 to 21926 million USD by 2022. The increase was relatively steady, reflecting ongoing or increasing investments in the company's operational base. Despite the rise in invested capital, the company's ability to generate positive economic returns did not improve accordingly, as indicated by the persistent negative economic profit.

Economic Spread Ratio

The economic spread ratio, representing the difference between return on invested capital and the cost of capital, remained negative in all observed years. Although it improved from -12.01% in 2018 to -7.09% in 2021, indicating a reduction in the gap between returns and costs, it worsened again in 2022 to -9.42%. This oscillation in economic spread ratio parallels the trend in economic profit, reinforcing the notion that the company experienced fluctuating operational efficiency and value generation capability within the studied timeframe.

In summary, while invested capital steadily increased over the five years, both economic profit and economic spread ratio exhibited persistent negative performance with periods of partial recovery followed by decline. The data suggests challenges in achieving returns exceeding capital costs, pointing to potential issues in operational efficiency or profitability that may warrant further investigation.

Adjusted Revenues

The adjusted revenues showed a positive growth trend from 2018 to 2021. Specifically, revenues increased steadily each year, starting at 10,434 million US dollars in 2018 and reaching a peak of 14,447 million US dollars in 2021. However, in 2022, there was a slight decline to 14,382 million US dollars compared to the previous year, indicating a plateau or minor fluctuation in revenue generation.

Economic Profit

The economic profit remained negative throughout the analyzed period, signifying ongoing economic losses during all years. However, the magnitude of the loss showed some improvement over the years 2018 to 2021, where the negative value decreased from -2,457 million to -1,506 million US dollars. This suggests a reduction in economic losses or better cost control. Conversely, in 2022, economic profit worsened again, increasing the loss to -2,066 million US dollars, indicating a setback after the previous improvement.

Economic Profit Margin

The economic profit margin, expressed as a percentage, mirrored the trend observed in economic profit. The margin was consistently negative but improved from -23.54% in 2018 to -10.43% in 2021. This reflects enhanced operational efficiency or profitability relative to revenues during those years. Despite this improvement, the margin declined to -14.36% in 2022, denoting decreased profitability relative to revenue in the latest period examined.