Medtronic PLC (NYSE:MDT)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes shows considerable fluctuation over the reported periods. It started at 4,408 million US dollars and experienced a decline to 4,049 million in the subsequent year. A notable increase was observed in the third year, reaching 4,888 million US dollars, followed by a decrease to 4,151 million and further decline to 3,736 million. In the last year, there was a significant recovery to 4,980 million US dollars. This pattern indicates volatility in operating profitability, with an overall upward trend toward the final period.

Cost of Capital

The cost of capital remained relatively stable over the periods, ranging between 10.84% and 11.28%. The highest level was observed in the second year at 11.28%, with a slight downward trend thereafter, ending at 10.84% in the last period. This stability suggests steady capital costs despite fluctuations in profitability and invested capital.

Invested Capital

Invested capital displayed moderate variability across the intervals. The initial value was 71,146 million US dollars, increased marginally to 72,405 million in the second year, and then generally decreased to 68,670 million by the fifth year. In the final year, invested capital rose again to 70,365 million US dollars. This pattern reflects some degree of capital adjustment, possibly in response to operational or strategic considerations.

Economic Profit

Economic profit remained negative throughout all periods, indicating that returns did not exceed the cost of capital. The losses showed some fluctuation, beginning at -3,380 million USD and worsening to -4,115 million in the second year. Thereafter, the economic loss decreased to -2,826 million but increased again in the following two years to -3,738 million and -3,806 million respectively. The final period exhibited an improvement with losses narrowing to -2,648 million US dollars. This trend highlights ongoing challenges in generating value above the capital cost, despite variations in profitability and invested capital.

Net Income Attributable to Medtronic

The net income figures demonstrated variability over the reported periods. Starting at 4,789 million US dollars in April 2020, the net income decreased significantly to 3,606 million by April 2021. It rebounded to 5,039 million in April 2022, indicating a strong recovery. However, a subsequent decline occurred, with net income falling to 3,758 million in April 2023 and slightly decreasing again to 3,676 million in April 2024. The latest period, April 2025, shows an improvement to 4,662 million, suggesting a positive turnaround in profitability.

Net Operating Profit After Taxes (NOPAT)

NOPAT followed a somewhat similar pattern to net income, but with slightly less fluctuation. It decreased from 4,408 million in April 2020 to 4,049 million in April 2021. Then, it increased again to 4,888 million by April 2022. Thereafter, it declined to 4,151 million in April 2023 and further down to 3,736 million in April 2024. The most recent figure in April 2025 reached 4,980 million, representing the highest value among the periods analyzed and indicating improved operational profitability.

Overall Trend Analysis

Both net income and NOPAT exhibited cyclical patterns with notable decreases in 2021 and 2023-2024, followed by recoveries in 2022 and 2025. The volatility suggests the company faced varying operational and market challenges throughout the periods. The recent rise in both metrics in 2025 points towards an enhanced financial performance and operational efficiency. Furthermore, the highest NOPAT value in the final period underscores an improvement in profitability after taxes on operating income, which is a positive indicator for core business performance.

The financial data reveals notable trends in the tax-related expenses over the observed period.

Income Tax Provision (Benefit)

The income tax provision shows significant fluctuations from 2020 to 2025. Initially, in 2020, there was a tax benefit of -$751 million, indicating a negative tax provision. However, from 2021 onwards, there is a reversal to positive tax provisions, increasing from $265 million in 2021 to a peak of $1,580 million in 2023. Thereafter, the provision decreases to $1,133 million in 2024 and further to $936 million in 2025. This pattern suggests an initial tax advantage followed by growing tax liabilities that begin to moderate in the final years of the period.

Cash Operating Taxes

Cash operating taxes demonstrate a consistent upward trend throughout the period from 2020 to 2023, increasing from $761 million to $1,979 million. In 2024, there is a slight decline to $1,820 million, followed by a further decrease to $1,436 million in 2025. This rise and subsequent decline in cash taxes could reflect operational performance fluctuations or changes in tax strategies and cash management.

Overall, the data indicates evolving tax expenses with an initial tax benefit turning into substantial tax provisions and an increasing trend in cash operating taxes until 2023, followed by a moderate decline in the last two reporting periods.

The financial data shows several notable trends over the six-year period under review.

Total reported debt & leases

The total reported debt and leases have generally increased, growing from 25,742 million US dollars in April 2020 to 29,626 million US dollars in April 2025. Despite some fluctuations, such as a decrease in 2022, the overall trend is upward, indicating a gradual rise in leverage or financing through debt and leases.

Shareholders’ equity

Shareholders’ equity experienced a slight increase from 50,737 million US dollars in April 2020 to a peak of 52,551 million US dollars in April 2022. However, from that peak, equity declined steadily to 48,024 million US dollars by April 2025. This downward trajectory in equity may reflect distributions to shareholders, asset impairments, or other factors reducing net asset value.

Invested capital

Invested capital saw a modest increase from 71,146 million US dollars in April 2020 to a peak near 72,405 million US dollars in April 2021. Subsequently, it declined to a low of 68,670 million US dollars in April 2024 before rising again to 70,365 million US dollars in April 2025. This pattern suggests some variability in the company's capital investment or asset base, with a general trend of moderate fluctuation rather than sustained growth or contraction.

Economic Profit

The economic profit exhibited a fluctuating trend over the six-year period. It started at a significant negative value and worsened in the second year. Subsequently, there was an improvement in the third year, followed by a decline again in the fourth and fifth years. The final year showed a notable improvement, reaching the least negative point in the examined timeline. Despite this improvement, economic profit remained negative throughout, indicating ongoing challenges in generating wealth beyond the cost of capital.

Invested Capital

Invested capital displayed relative stability with minor fluctuations. Starting at approximately 71,146 million US dollars, it experienced a slight increase in the second year, followed by a decrease in the third year. The amount then stabilized with minor movements around 70,000 million US dollars through the later years. This pattern suggests consistent investment levels with some periods of capital reduction and replenishment.

Economic Spread Ratio

The economic spread ratio consistently remained negative across all reported years, indicating the returns on invested capital were below the cost of capital. The ratio worsened from -4.75% to a low of -5.68% in the second year, improved to -4.06% in the third year, then slightly declined again before improving to -3.76% in the last year. This oscillation reflects fluctuating but persistently negative economic profitability, with some recovery towards the end of the period.

Adjusted Net Sales

The adjusted net sales show a consistent increasing trend over the observed periods. Beginning at approximately 28.9 billion US dollars, sales increased steadily each year, reaching around 33.5 billion US dollars by the final period. This represents a compound growth, indicating expanding revenue generation capabilities.

Economic Profit

Economic profit figures are negative throughout all periods, indicating that the company has not generated positive economic profit during this timeframe. The values fluctuate notably but exhibit an overall improving trend in the latter years. Starting at a loss of roughly 3.38 billion US dollars, the economic loss widened to approximately 4.11 billion in the following year before improving and declining in magnitude to about 2.65 billion in the last period.

Economic Profit Margin

The economic profit margin remains negative across all years, consistent with the economic profit values. The margin starts near -11.7% and deteriorates to nearly -13.63% in the second year, reflecting greater inefficiency or lower profitability relative to sales. Subsequently, there is a recovery trend with margins improving and reaching approximately -7.9% in the final year. This suggests improved operational efficiency or better management of costs relative to sales, despite remaining below zero.

Overall Analysis

The data reveals a company achieving steady revenue growth while still struggling to translate this growth into positive economic profit and margin improvements. The negative economic profit throughout the periods points to challenges in covering the cost of capital or generating returns above their cost base. However, the improved economic profit margin in later years signals operational improvements or cost management initiatives, which are reducing profitability losses relative to sales. Continued focus on efficiency and cost control could aid in moving towards positive economic profit in future periods.