Norfolk Southern Corp. (NYSE:NSC)

The financial data reveals several notable trends in key performance indicators over the five-year period from 2017 to 2021.

Return on Assets (ROA)

The ROA shows a general downward trend from 15.13% in 2017 to a low of 5.3% in 2020, followed by a partial recovery to 7.81% in 2021. This indicates that the company's efficiency in generating profits from its assets declined considerably during this period, reaching its lowest point in 2020, before improving slightly in the subsequent year.

Financial Leverage

Financial leverage has steadily increased each year, moving from a ratio of 2.18 in 2017 to 2.82 in 2021. This trend suggests an increasing reliance on debt financing relative to equity over time. The rising leverage implies that the company has been progressively amplifying its use of borrowed funds, which may impact financial risk and cost of capital.

Return on Equity (ROE)

The ROE experienced a significant decline from 33.03% in 2017 to 13.61% in 2020, echoing the downward trend seen in ROA. Nevertheless, 2021 exhibited a notable improvement, with ROE rising to 22.03%. This pattern suggests that while the company’s profitability for shareholders decreased substantially through 2020, a recovery phase began in 2021.

In summary, the company’s profitability ratios indicated a weakening performance through 2020, coinciding with a continuous increase in financial leverage. The partial rebound in both ROA and ROE in 2021 suggests some improvement in asset utilization and shareholder returns, despite the ongoing higher leverage. This combination may indicate strategic adjustments or market factors influencing the firm’s operational efficiency and financial structure during the observed periods.

Net Profit Margin

The net profit margin shows a declining trend from 51.22% in 2017 to 20.56% in 2020, indicating reduced profitability during this period. However, it recovered to 26.97% in 2021, suggesting an improvement in profit efficiency relative to sales after the decline.

Asset Turnover

Asset turnover remained relatively stable but generally low over the five-year period, fluctuating between 0.26 and 0.32. This indicates that the company generated roughly $0.26 to $0.32 in sales for each dollar of assets, with a slight dip in 2020 and a modest recovery in 2021.

Financial Leverage

Financial leverage steadily increased from 2.18 in 2017 to 2.82 in 2021, reflecting a gradual rise in the use of debt or other liabilities in the capital structure. This increase may indicate higher financial risk but also the potential for amplified returns to equity holders.

Return on Equity (ROE)

ROE experienced a significant decline from 33.03% in 2017 to a low of 13.61% in 2020, consistent with the trends in net profit margin and asset turnover. In 2021, ROE rebounded to 22.03%, suggesting a partial recovery in the company’s ability to generate returns on shareholder equity.

The financial data over the observed periods reveal several distinct trends in key performance indicators.

Tax Burden

The tax burden ratio significantly decreased from 1.73 in 2017 to a range between 0.77 and 0.80 in subsequent years, stabilizing around 0.77 by 2021. This implies a more efficient tax management or changes in tax policy affecting the company's net profit.

Interest Burden

The interest burden ratio remained relatively stable, fluctuating slightly between 0.80 and 0.86 over the five-year period, indicating consistent interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin displayed a general upward trend, starting at 34.86% in 2017, slightly increasing to 36.25% in 2019, dipping to 32.23% in 2020, and then rising sharply to 40.6% in 2021. This reflects improved operational efficiency and profitability, particularly notable in 2021 after a minor decline in the pandemic year 2020.

Asset Turnover

Asset turnover ratio showed some volatility, increasing marginally from 0.30 in 2017 to 0.32 in 2018, then dropping to 0.26 in 2020 before partially recovering to 0.29 in 2021. This indicates a slight reduction in the efficiency with which assets generate sales, particularly in 2020.

Financial Leverage

Financial leverage consistently increased over the timeframe, rising from 2.18 in 2017 to 2.82 in 2021. This suggests a growing reliance on debt financing relative to equity, which may elevate financial risk but also potentially enhance returns.

Return on Equity (ROE)

ROE decreased from 33.03% in 2017 to a low of 13.61% in 2020, before rebounding to 22.03% in 2021. The decline corresponds with lower profitability and efficiency during the pandemic period, while the recovery aligns with improved margins and operational performance in the latest year.

Overall, the data points to a company that experienced a period of decreased profitability and efficiency during 2020, likely influenced by external factors, followed by a strong recovery in 2021. The increase in financial leverage throughout the period suggests a strategic decision toward greater debt usage to potentially amplify equity returns despite the associated risks.

The financial data over the five-year period from December 31, 2017, to December 31, 2021, reveals several notable trends in profitability and asset utilization.

Net Profit Margin

The net profit margin exhibited a significant decline from 51.22% in 2017 to 23.27% in 2018, indicating a substantial reduction in profitability relative to revenue. It then stabilized somewhat around the mid-20% range, with slight fluctuations resulting in a margin of 26.97% by the end of 2021. This suggests that while the company faced profitability pressures after 2017, its profit generation relative to sales improved modestly after the initial drop.

Asset Turnover

The asset turnover ratio, which measures revenue generated per unit of assets, showed a relatively stable yet slightly declining trend. It started at 0.3 in 2017, peaked marginally to 0.32 in 2018, then decreased to 0.26 in 2020 before slightly increasing again to 0.29 in 2021. This pattern indicates a slight reduction in the efficiency of asset utilization in generating sales over the period, with a minor recovery at the end.

Return on Assets (ROA)

Return on assets mirrored the trend seen in net profit margin, signaling profitability challenges. ROA decreased sharply from 15.13% in 2017 to about 7.36% in 2018 and remained relatively flat around 5.3% to 7.8% through 2021. This demonstrates a sustained reduction in the company’s ability to generate profit from its assets after the initial drop, consistent with the reduced net profit margin and the static asset turnover ratio.

In summary, the company experienced a marked decline in profitability starting in 2018, reflected in both net profit margin and return on assets. Asset efficiency, as measured by asset turnover, declined slightly but remained relatively stable. The overall pattern suggests that while revenue relative to assets did not deteriorate drastically, reduced margins led to lower returns on assets, indicating possible cost pressures or changes in pricing strategy affecting net profitability.

The financial data reveals several key trends over the five-year period from 2017 to 2021. The Tax Burden ratio shows a significant decline from 1.73 in 2017 to approximately 0.77 in the subsequent years, stabilizing around that level through 2021. This sharp decrease suggests a substantial reduction in the effective tax rate or a change in tax-related accounting or policy post-2017.

The Interest Burden ratio remains relatively stable, oscillating slightly between 0.8 and 0.86. This indicates consistent management of interest expenses relative to earnings before interest and taxes (EBIT), with a minor dip in 2020 likely reflecting pandemic-related financial pressures.

The EBIT Margin demonstrates an overall positive trend. Starting at 34.86% in 2017, it increases modestly to 36.25% in 2019, falls to 32.23% in 2020, and then rises sharply to 40.6% in 2021. This pattern may reflect operational challenges during 2020 followed by significant improvements in profitability or cost management in 2021.

Asset Turnover, a measure of efficiency in using assets to generate revenue, shows minor fluctuations with a peak of 0.32 in 2018 and the lowest point at 0.26 in 2020 before a slight recovery to 0.29 in 2021. The decline in 2020 corresponds with the global economic disruption period, affecting asset utilization efficiency.

Return on Assets (ROA) has decreased considerably from 15.13% in 2017 to levels around 7% in the following years, hitting a minimum of 5.3% in 2020 before a modest recovery to 7.81% in 2021. This decline aligns with the reductions in Asset Turnover and EBIT Margin during the challenging period of 2020, reflecting diminished overall asset profitability, with partial recovery evident by 2021.

Tax Burden

Markedly decreased after 2017, stabilizing at a lower level, indicating lower effective tax rates or changes in tax accounting.

Interest Burden

Remained relatively stable, indicating consistent control over interest expenses.

EBIT Margin

Initially increased, dipped in 2020, and then significantly improved in 2021, reflecting operational volatility and recovery.

Asset Turnover

Generally stable with a dip in 2020, suggesting periods of less efficient asset use during economic disruptions.

Return on Assets (ROA)

Declined sharply from 2017, with the lowest point during 2020, and partial recovery afterward, mirroring operational and efficiency trends.

The analysis of the annual financial data reveals several notable trends across the key profitability and burden ratios over the five-year period from 2017 to 2021.

Tax Burden Ratio

The tax burden ratio demonstrates a significant decline from 1.73 in 2017 to a consistent range between 0.77 and 0.80 from 2018 onwards. This sharp decrease from 2017 to 2018 suggests a considerable change in tax-related expenses or tax strategy, stabilizing at a lower level in subsequent years.

Interest Burden Ratio

The interest burden ratio remains relatively steady throughout the period, fluctuating marginally between 0.80 and 0.86. This indicates consistent management of interest expenses relative to earnings before interest and taxes (EBIT), with no substantial increase or decrease in interest expense burden over time.

EBIT Margin

The EBIT margin shows a generally positive trend with some variability. Starting at 34.86% in 2017, it increases slightly to 35.14% in 2018 and further rises to 36.25% in 2019. There is a notable dip in 2020 to 32.23%, likely reflecting operational challenges or external economic factors during that year. However, the margin recovers strongly in 2021, reaching its highest value at 40.6%, indicative of improved operational efficiency or profitability during that year.

Net Profit Margin

The net profit margin experiences a marked decline from an exceptionally high value of 51.22% in 2017 to a range between 20.56% and 26.97% in the following years. From 2018 onward, margins stabilize somewhat, with minor fluctuations. The decline from 2017 suggests either a one-time gain or an extraordinary event impacting that year’s results or a significant increase in expenses or taxes subsequently. Despite lower margins compared to 2017, the slightly upward movement in 2021 indicates gradual improvement in overall profitability.

Overall, the company's financial ratios reflect a transition phase with stabilization in tax and interest burdens, a temporary decline in operational profitability in 2020, followed by a strong recovery in EBIT margin in 2021. The net profit margin pattern suggests that 2017 was an outlier year, with subsequent years displaying normalized profitability levels with mild improvement toward the end of the period.