RH (NYSE:RH)

Net operating profit after taxes (NOPAT)

The NOPAT exhibits an overall upward trend from February 2018 to January 2022, increasing from 78,790 thousand US dollars in 2018 to a peak of 752,355 thousand US dollars in 2022. However, there is a notable decline in 2023, where the value decreases to 544,162 thousand US dollars. This indicates significant growth in operating profitability until 2022, followed by a reduction in the most recent year.

Cost of capital

The cost of capital fluctuates throughout the period, starting at 19.32% in 2018 and reaching a high of 23.7% in 2021. After this peak, it declines to 19.02% in 2022 and further to 17.54% in 2023. Despite the fluctuations, the overall trend shows some volatility with a peak in 2021, then a downward movement in subsequent years.

Invested capital

Invested capital increases steadily from 1,226,304 thousand US dollars in 2018 to a substantial peak in 2022 of 4,553,261 thousand US dollars. In 2023, there is a slight decrease to 4,379,253 thousand US dollars. This trend demonstrates a consistent expansion of invested assets over the years with a minor retreat in the latest year.

Economic profit

Economic profit shows a predominantly negative pattern. It starts with a significant loss of 158,130 thousand US dollars in 2018, improves slightly to a small positive value of 4,493 thousand US dollars in 2020, but then declines again into negative territory, reaching -223,768 thousand US dollars in 2023. This suggests that despite increases in NOPAT and invested capital, the company has struggled to generate returns above its cost of capital, leading to continued economic losses in most years.

Net Income

The net income has shown a significant upward trend from 2018 to 2022, starting at 2,180 thousand US dollars in 2018 and reaching a peak of 688,546 thousand US dollars in 2022. However, in 2023, there is a notable decline to 528,642 thousand US dollars, indicating a decrease from the previous year's peak.

Net Operating Profit After Taxes (NOPAT)

NOPAT has also demonstrated a consistent increase over the years, rising from 78,790 thousand US dollars in 2018 to 752,355 thousand US dollars in 2022. Similar to net income, NOPAT decreases in 2023 to 544,162 thousand US dollars, showing a reduction compared to the prior year.

Overall Trends and Insights

Both net income and NOPAT exhibit strong growth from 2018 through 2022, reflecting improved profitability and operational efficiency. The concurrent decline in both metrics in 2023 suggests potential challenges or one-time events that affected the company's earnings and operating profit. Despite the decrease in 2023, the company maintains substantially higher profitability levels compared to the earlier years.

Income Tax Expense (Benefit)

The income tax expense shows a general upward trend from 2018 through 2022, increasing from 27,971 thousand US dollars in 2018 to a peak of 133,558 thousand US dollars in 2022. This indicates a substantial rise in reported tax expense over this period. However, in 2023, there is a significant reversal, with the figure turning negative to -91,358 thousand US dollars, suggesting a tax benefit or refund in that year rather than an expense.

Cash Operating Taxes

Cash operating taxes exhibit a consistent increase from 58,643 thousand US dollars in 2018 to a high of 159,201 thousand US dollars in 2022. This steady growth indicates rising cash outflows for taxes related to operations. In 2023, however, the cash operating taxes decline sharply to 30,049 thousand US dollars, which is less than one-fifth of the prior year’s amount, pointing to a significant reduction in tax payments made in cash during this period.

Overall Tax Trends

Both income tax expense and cash operating taxes generally trend upwards through most of the timeframe, reflecting increasing tax obligations. The notable shifts in 2023, with income tax expense turning into a benefit and cash operating taxes dropping markedly, suggest exceptional tax events or adjustments that could be related to changes in profitability, tax regulation, or tax planning strategies implemented during or prior to that fiscal year. The divergence between tax expense and cash taxes in the final year indicates that the recorded tax expense does not correspond to actual cash outflows, highlighting potential timing differences or non-cash tax items influencing the reported figures.

Total reported debt & leases

The total reported debt and leases show a generally increasing trend over the analyzed periods. Starting at approximately 1.25 billion US dollars in early 2018, the amount rises modestly to about 1.3 billion in early 2019. A significant increase is observed in 2020, reaching around 1.8 billion, followed by a slight decline in 2021 to about 1.62 billion. However, from 2021 to 2023, the debt nearly doubles, peaking at approximately 3.75 billion US dollars by early 2023. This indicates a substantial increase in leverage towards the latter years.

Stockholders’ equity (deficit)

Stockholders’ equity exhibits notable volatility. It begins with a deficit of roughly -7.3 million in early 2018, worsening to -22.9 million in 2019. A positive turnaround occurs in 2020, with equity improving to about 18.7 million. This positive trajectory continues strongly, reaching approximately 447 million in 2021 and peaking at around 1.17 billion in 2022. However, equity declines significantly in 2023 to roughly 784 million, though it remains positive. The initial deficits suggest prior financial struggles, followed by a recovery period and some recent weakening.

Invested capital

Invested capital follows a pattern similar to total debt and equity combined, displaying growth over the period examined. Starting near 1.23 billion in 2018, it remains relatively flat through 2019 before a marked increase to about 1.77 billion in 2020. Steady growth continues into 2021, reaching just over 2 billion. A substantial surge occurs in 2022, with invested capital approximately doubling to 4.55 billion, before slightly decreasing to 4.38 billion in 2023. The significant increase in invested capital aligns with the rise in debt and equity previously noted, indicating increased capitalization.

Economic Profit

The economic profit demonstrated notable volatility over the analyzed periods. Initially, it was substantially negative at -158,130 thousand US dollars, improving significantly by the next year to a small negative figure of -5,782 thousand. It then turned positive in 2020, reaching 4,493 thousand US dollars, indicating a temporary period of value creation. However, the figure reverted sharply to a large negative value of -140,196 thousand in 2021 and continued to exhibit significant negative values in the subsequent years, finishing 2023 at -223,768 thousand. This fluctuation suggests instability in generating returns above the cost of capital.

Invested Capital

Invested capital displayed a consistent upward trend from 1,226,304 thousand US dollars in 2018 to a peak of 4,553,261 thousand in 2022, followed by a slight decrease to 4,379,253 thousand in 2023. The increase over these years indicates substantial growth in the capital base, more than tripling from the initial period to the high point in 2022. The slight decline in 2023 might indicate partial divestment or asset adjustment but remains significantly higher than in earlier years.

Economic Spread Ratio

The economic spread ratio was negative in most periods, starting at -12.89% in 2018 and narrowing nearly to zero and briefly turning positive in 2020 at 0.25%, reflecting a brief period of favorable return relative to capital costs. However, from 2021 onwards, the ratio declined again, showing negative values between -2.5% and -6.93%, indicating that returns on invested capital frequently fell short of the benchmark required returns. The ratio ended at -5.11% in 2023, reflecting persistent challenges in achieving economic profits.

The financial data reveals several noteworthy trends and fluctuations over the examined periods. Net revenues demonstrate a general upward trajectory, increasing steadily from approximately 2.44 billion US dollars in early 2018 to a peak of about 3.76 billion in early 2022. However, this was followed by a slight decline to roughly 3.59 billion US dollars in early 2023, indicating a potential moderation in revenue growth or market challenges in the most recent period.

Economic profit exhibits a highly volatile pattern, with alternating positive and negative values. The company recorded a substantial economic loss of about 158 million US dollars in 2018, dramatically improved to a minor loss in 2019, and then reported a positive economic profit of 4.5 million in 2020. Nevertheless, economic profit declined sharply thereafter, returning to significant negative values both in 2021 and 2023, with a slight improvement in 2022. The most recent year shows the largest economic loss in the series, close to 224 million US dollars, suggesting heightened challenges in generating economic value beyond accounting profits.

The economic profit margin closely parallels the movements in economic profit, reflecting negative margins in most years, with a marginally positive margin in 2020. The margin moved from -6.48% in 2018 down to -6.23% in 2023, with the exception of a near breakeven in 2019 (-0.23%) and a positive margin of 0.17% in 2020. These figures imply ongoing difficulties in translating revenues into sustainable economic profit, despite the general increase in net revenues. The persistence of negative economic profit margins in recent years highlights potential issues such as rising costs, inefficiencies, or competitive pressures limiting value creation.

Overall, while revenue growth has been largely positive over the period, this has not consistently translated into positive economic profit. The data suggests that the company faces ongoing challenges in managing costs or driving operational efficiency to achieve sustainable economic profitability.