National Oilwell Varco Inc. (NYSE:NOV)

Return on Assets (ROA)

The Return on Assets shows an increasing trend starting from 7.82% in March 2012, reaching a peak of approximately 8.36% by December 2011. From 2012 to mid-2014, the ROA stabilizes around 6.68% to 7.48%, indicating steady asset profitability. However, beginning in early 2015, a notable decline is observed, with ROA gradually falling to 4.55% by March 2016. This downward trend culminates in negative returns in the subsequent quarters, reaching -7.16% by June 2016, suggesting a significant deterioration in the company’s ability to generate profits from its assets.

Financial Leverage

Financial leverage exhibits a relatively stable pattern throughout the observed periods. Starting near 1.42 in early 2011, leverage ratios shift mildly upwards, peaking around 1.7 in early 2015. After this peak, a slight reduction to approximately 1.48 by mid-2016 is evident. The overall leverage remained within a narrow band, suggesting controlled use of debt relative to equity. The gradual increase until 2015 implies a moderate escalation in liabilities financing, followed by a conservative deleveraging strategy or equity adjustment in subsequent quarters.

Return on Equity (ROE)

Return on Equity reflects a similar trend to ROA, with initial growth from 11.32% in March 2012 to above 12% in the subsequent quarters up to 2013. Post this period, ROE maintains a moderate decline, hovering between 10% and 12% until early 2015. From that point onwards, there is a sharp downturn, with ROE dropping first to 7.44% by early 2016 before turning negative, reaching -10.57% by June 2016. This deterioration suggests decreasing profitability from shareholders’ investments and may be attributed to the worsening asset returns coupled with shifts in leverage.

Overall Insights

The combined analysis indicates that while the company maintained reasonable profitability and leverage control up until early 2015, subsequent periods experienced marked financial stress. The declining ROA and ROE into negative territory point toward operational difficulties or adverse market conditions impacting profitability. The stability in financial leverage suggests that while debt levels were managed conservatively, deteriorating returns were significant enough to impact overall equity returns negatively. These trends highlight a need for strategic review to address profitability challenges.

The analyzed financial ratios exhibit notable trends over the observed periods. Initially, the net profit margin demonstrates a gradual decline starting from the first available data point, decreasing from 13.6% in March 2012 to negative figures by the first half of 2016. This transition indicates profitability challenges culminating in losses, reaching a low of -17.14% by June 2016.

Asset turnover maintains a relatively stable pattern during the middle periods, ranging from 0.57 to 0.66 between early 2012 and late 2014, suggesting consistent efficiency in asset utilization. However, a clear downward trend is observable beginning in early 2015, falling from 0.64 to 0.42 by mid-2016, which may indicate diminishing effectiveness in generating revenue from assets.

Financial leverage shows moderate fluctuation but generally trends upward from 1.42 in early 2011 to a peak around 1.70 in early 2015. Post-2015, leverage slightly decreases to approximately 1.48 by mid-2016. This suggests a period of increased reliance on debt financing or equity multiplier before a modest reduction.

Return on equity (ROE) mirrors the net profit margin trend, initially climbing from 11.32% in early 2012 to a peak of around 12.31% by late 2012, followed by a downward trajectory that turns negative by 2016. The lowest point recorded is -10.57% in June 2016, reflecting deteriorating profitability and efficiency in generating returns for shareholders over the period.

Net Profit Margin

Declined progressively from positive margins above 13% in early 2012 to negative margins exceeding -17% by mid-2016.

Asset Turnover

Remained stable between 0.57 and 0.66 from 2012 through 2014, then declined steadily to 0.42 by mid-2016.

Financial Leverage

Increased moderately from around 1.42 in early 2011 to a peak near 1.70 in 2015, before decreasing slightly by mid-2016.

Return on Equity (ROE)

Peaked around 12.31% in late 2012, then decreased, turning negative and reaching -10.57% by mid-2016.

Overall, the financial indicators reflect a period of initially stable performance, followed by a notable decline in profitability and efficiency from 2014 onward. The increasing financial leverage during the earlier periods may have compounded risks as profitability deteriorated. The simultaneous decrease in asset turnover and return on equity suggest operational challenges that negatively impacted shareholder returns.

The financial ratios presented exhibit notable trends over the observed periods.

Tax Burden Ratio

This ratio remained relatively stable from March 2012 through June 2016, fluctuating narrowly between 0.68 and 0.71, indicating consistent taxation impact on pre-tax income during this timeframe.

Interest Burden Ratio

The interest burden ratio showed a slight gradual decline from 0.99 in early 2012 to 0.95 by mid-2015, reflecting a marginally increasing interest expense relative to earnings before interest and taxes. This suggests a modest rise in financial costs over time.

EBIT Margin (%)

The EBIT margin exhibited a declining trend over the periods. Initially, it hovered around 20% in early 2012 but decreased consistently to approximately 15% by the end of 2014. The margin then deteriorated sharply in 2015 and early 2016, turning negative by March 2016 and worsening substantially by June 2016, indicating significant operational profitability challenges in the latter periods.

Asset Turnover Ratio

The asset turnover ratio demonstrated a slight upward movement early on, rising from around 0.57 in early 2012 to peak near 0.66 during 2014. From mid-2015, it declined steadily, reaching 0.42 by mid-2016. This suggests decreasing efficiency in utilizing assets to generate revenue during the most recent periods.

Financial Leverage Ratio

Financial leverage showed an overall upward trend from 1.42 at the start of the observed periods to a peak of about 1.70 in early 2015. A slight decline followed toward mid-2016, ending near 1.48. The initial increase could imply greater reliance on debt financing, which diminished modestly later.

Return on Equity (ROE) (%)

ROE followed a trajectory similar to EBIT margin, starting around 11-12% in early 2012 and maintaining relatively steady values through 2014. A decline began in 2015, with ROE dropping to negative territory by early 2016, reaching approximately -10.57% by mid-2016. This trend signals deteriorating profitability and possible shareholder value erosion in recent quarters.

Overall, the data reflect stable tax and interest burdens but highlight weakening operational profitability and asset utilization from 2014 onwards. Increasing financial leverage was observed initially, with some reduction later, yet the return on equity deteriorated significantly, indicating heightened financial and operational risks during the latter periods analyzed.

The analysis of the financial ratios over the specified periods reveals several notable trends in the company's profitability, efficiency, and asset utilization.

Net Profit Margin (%)

The net profit margin shows initial stability with values around 13.6% to 13.87% during 2011 and early 2012. There is a gradual decline throughout the subsequent years, with the margin decreasing steadily from approximately 12.88% in late 2012 to near 7.6% by late 2015. The margin turns negative in the quarters of 2016, indicating losses, reaching -17.14% by mid-2016. This indicates significant pressure on profitability, culminating in net losses by the end of the observation period.

Asset Turnover (ratio)

Asset turnover ratios demonstrate moderate fluctuations across the timeline, initially ranging from 0.57 to 0.65 between 2011 and early 2014. The ratio remains relatively stable, oscillating around 0.63 to 0.66 in 2013 and 2014, reflecting consistent asset utilization efficiency. From 2015 onwards, the ratio visibly declines from 0.64 down to 0.42 in mid-2016, indicating a diminishing ability to generate revenue from assets.

Return on Assets (ROA) (%)

Return on assets begins at a solid level of approximately 7.8% to 8.36% through 2011 and 2012. A declining trend emerges through subsequent years, with ROA dropping steadily from about 7.91% in early 2013 to 4.55% by late 2015. The figure deteriorates further turning negative during 2016, with the lowest ROA reaching -7.16%, reflecting deteriorated asset profitability and inefficient capital deployment.

Overall, the company experienced a period of relatively stable profitability and asset efficiency from 2011 to 2014. Starting around 2015, all key indicators began to decline significantly, with profitability and return metrics turning negative by 2016. This trend suggests underlying operational or market challenges that adversely affected financial performance during the latter periods under review.

Tax Burden

The tax burden ratio displayed a relatively stable trend from the first quarter of 2012 through to the second quarter of 2016. Values fluctuated marginally around approximately 0.68 to 0.71, indicating consistent tax expenses relative to earnings before tax during this period.

Interest Burden

The interest burden ratio remained consistently close to 1.00 initially, starting at 0.99 in early 2012 and showing a slight gradual decline to 0.95 by mid-2016. This suggests a minor increase in interest expenses over time but still relatively low and stable interest costs in relation to earnings before interest and tax.

EBIT Margin

The EBIT margin demonstrated a noticeable downward trend over the observed period. Beginning at a high of just over 20% in the first quarter of 2012, it decreased steadily, reaching slightly above 15% by late 2013 and early 2014. After maintaining a mid-teens level through 2014 and early 2015, the margin sharply declined in late 2015 and into the first half of 2016, turning negative and reaching approximately -19.65% by mid-2016. The trend indicates deteriorating operational profitability, particularly severe in the latest quarters.

Asset Turnover

Asset turnover ratios showed a moderate upward trend from early 2012 to late 2013, increasing from about 0.57 to 0.66, suggesting improved efficiency in generating revenue from assets during that period. After a period of relative stability around 0.64 to 0.66 throughout 2014 and early 2015, asset turnover declined steadily afterward, falling to 0.42 by mid-2016. This decline implies reduced efficiency in utilizing assets to generate sales in the later periods.

Return on Assets (ROA)

Return on assets followed a pattern closely aligned with EBIT margin and asset turnover trends. It rose moderately in early periods, peaking near 8.36% in late 2011, then gradually declined to just above 7% in 2014. Thereafter, ROA decreased significantly, dropping below zero in the final quarters recorded, bottoming near -7.16% by mid-2016. This reflects an overall reduction in profitability relative to total assets, especially pronounced in the final quarters.

The financial data reveals several notable trends over the observed periods. The tax burden ratio remains relatively stable, fluctuating slightly around 0.68 to 0.71 from early 2012 through mid-2016, indicating consistent tax impact on earnings during this timeframe.

The interest burden ratio shows a marginal downward trend, starting near 0.99 and gradually declining to approximately 0.95 by the middle of 2016. This suggests a minor improvement in interest-related expenses or financial costs over time, somewhat easing the burden on pre-tax income.

The EBIT margin percentage demonstrates a clear decreasing trend across the periods. Initially, the margin is above 20%, maintaining some stability in 2011. From 2012 through 2014, the margin declines progressively from around 18.93% to approximately 17%. Subsequently, the downturn intensifies, falling below 15% in early 2015 and plunging to negative figures by 2016, reaching as low as -19.65%. This sharp decline signals deteriorating operating profitability, possibly due to rising costs or declining revenues.

Similarly, the net profit margin mirrors the EBIT margin trend, with values decreasing from approximately 13.6% in early 2012 to positive but lower teens through 2014, followed by a steep fall to negative margins in 2016, down to around -17.14%. This pattern indicates a worsening bottom line, likely reflecting adverse operational or market conditions impacting net earnings after all expenses and taxes.

In summary, while the tax burden remains steady and the interest burden improves slightly, both operating and net profitability margins display a significant downward trajectory throughout the periods, culminating in substantial losses in the most recent quarters. This trend points to increasing financial strain and challenges in sustaining earnings performance.