IQVIA Holdings Inc. (NYSE:IQV)

The analysis of the financial data reveals multiple trends over the five-year period under review.

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibited a generally increasing trend from 2018 through 2021, rising from $444 million in 2018 to a significant peak of $1,678 million in 2021. However, in 2022, there was a decline to $1,268 million. Despite this decrease in the last year, the overall five-year change shows substantial growth in operational profitability.

Cost of Capital

The cost of capital showed a steady, albeit moderate, increase over the period. It progressed from 14.17% in 2018 to 15.19% in 2022. This rise in capital costs could indicate growing risk perception or changes in the market environment affecting the firm's financing expenses.

Invested Capital

The total invested capital registered a gradual increase from $20,458 million in 2018 to $21,926 million in 2022. This incremental growth suggests ongoing investment or asset accumulation, though the rise is relatively modest, signaling a stable capital base with limited expansion during these years.

Economic Profit

Economic profit remained negative throughout the period, signifying that the returns did not exceed the cost of capital. Although there is an improvement from -$2,454 million in 2018 to a less negative -$1,503 million in 2021, the subsequent year saw a downturn to -$2,063 million. This pattern indicates that while the company improved value creation relative to capital costs up to 2021, it experienced deterioration in economic profit in 2022, reflecting challenges in generating returns above the cost of capital despite increasing NOPAT.

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.

Economic Profit

The economic profit remained negative throughout the observed periods, indicating consistent value destruction. It slightly improved from -2454 million USD in 2018 to -2312 million USD in 2020 but then showed considerable fluctuation by increasing to -1503 million USD in 2021, before deteriorating again to -2063 million USD in 2022.

Invested Capital

Invested capital demonstrated a gradual upward trend over the five-year period, rising from 20,458 million USD in 2018 to 21,926 million USD in 2022. This reflects a steady increase in the resources employed by the company.

Economic Spread Ratio

The economic spread ratio was consistently negative throughout the five years, indicating that the returns on invested capital were below the cost of capital. The ratio improved from -12% in 2018 and 2019 to -7.08% in 2021, suggesting a narrowing loss margin, but then reversed to -9.41% in 2022, implying some deterioration in economic efficiency.

Adjusted Revenues

The adjusted revenues demonstrated a consistent upward trend from 2018 to 2021, increasing steadily from $10,434 million in 2018 to $14,447 million in 2021. However, there was a slight decline in 2022, with adjusted revenues dropping marginally to $14,382 million, indicating a potential plateau or minor setback in growth.

Economic Profit

Economic profit showed persistent negative values throughout the period, signaling ongoing economic losses. Although the losses narrowed from -$2,454 million in 2018 to -$1,503 million by 2021, indicating an improvement in economic profitability, 2022 saw a reversal with economic profit worsening to -$2,063 million. This indicates that despite revenue growth, profitability struggles intensified towards the end of the period.

Economic Profit Margin

Economic profit margin improved consistently between 2018 and 2021, moving from -23.52% to -10.41%, reflecting better efficiency or cost management relative to revenue. Nevertheless, this positive trajectory was interrupted in 2022 when the margin declined to -14.34%, which, while still better than the earliest years, implies increased economic losses relative to revenues compared to the prior year.

Overall Insights

The company experienced revenue growth over most of the period, accompanied by improving economic profitability metrics. Yet, the deterioration in both economic profit and profit margin in 2022 suggests emerging challenges that impacted economic performance negatively despite maintaining high revenue levels. This pattern may warrant further examination of cost structures or operational efficiency to address the declining economic profitability.