Visa Inc. (NYSE:V)

The period between September 30, 2017, and September 30, 2022, demonstrates a generally positive trend in economic profit, although with some fluctuations. Net operating profit after taxes (NOPAT) and invested capital both exhibited increases over the observed timeframe, while the cost of capital remained relatively stable. These factors collectively influenced the company’s economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT increased from US$8,706 million in 2017 to US$15,234 million in 2022. A notable increase occurred between 2018 and 2019, rising from US$9,137 million to US$12,431 million. A slight decrease was observed between 2019 and 2020, falling to US$11,433 million, before resuming an upward trajectory through 2022.

Cost of Capital

The cost of capital experienced a modest increase over the period, moving from 15.21% in 2017 to 15.62% in 2022. The fluctuations were minimal, remaining within a narrow range of approximately 15.45% to 15.61% for most of the years. This relative stability suggests consistent market expectations regarding the company’s risk profile.

Invested Capital

Invested capital decreased from US$51,080 million in 2017 to US$47,578 million in 2018. It then increased significantly, reaching US$61,524 million in 2020, and remained relatively stable at approximately US$60,800 million through 2022. The increase in invested capital from 2018 to 2020 likely reflects strategic investments made by the company.

Economic Profit

Economic profit showed a positive trend overall, increasing from US$937 million in 2017 to US$5,706 million in 2022. The largest increase in economic profit occurred between 2018 and 2019, mirroring the increase in NOPAT. A decrease was noted between 2020 and 2021, but economic profit rebounded strongly in 2022, reaching its highest level during the observed period. This indicates the company is generating returns exceeding its cost of capital, and the trend suggests improving efficiency in capital allocation.

In summary, the company demonstrated an ability to generate increasing economic profit over the analyzed period, driven primarily by growth in NOPAT. While invested capital fluctuated, the overall trend in economic profit remained positive, indicating effective capital deployment and value creation.

The financial data reveals a consistent upward trajectory in both net income and net operating profit after taxes (NOPAT) over the period analyzed. Net income increased steadily from $6,699 million in 2017 to $14,957 million in 2022, showing robust growth across the years with a noticeable rise between 2017 and 2018, followed by continued incremental increases in subsequent years.

Similarly, NOPAT demonstrated an overall positive trend, starting at $8,706 million in 2017 and rising to $15,234 million in 2022. There was a slight deceleration in growth in 2018 compared to the previous year's jump, but subsequent years showed considerable gains, particularly between 2019 and 2021, before reaching the highest value in 2022.

Both metrics exhibit resilience during the year 2020, marked by a slight dip in net income from the previous year but a relatively stable NOPAT, indicating effective operational performance despite potential challenges. By 2021 and 2022, the figures rebounded strongly, surpassing prior highs, reflecting enhanced profitability and operational efficiency.

Net Income Trend

Substantial growth over the six-year span with minor fluctuations in 2020.

NOPAT Trend

Steady increase with a minor slowdown in 2018 and slight decline in 2020, followed by strong recovery.

Comparison Insights

The relationship between net income and NOPAT suggests consistent improvements in operational profitability and tax management, with NOPAT consistently exceeding net income, emphasizing effective operating margins.

Income Tax Provision

The income tax provision shows a fluctuating trend over the six-year period. Starting at 4,995 million USD in 2017, there is a significant decrease to 2,505 million USD in 2018. This is followed by a modest increase through 2019 and 2020, reaching 2,804 million USD and 2,924 million USD respectively. A notable rise occurs in 2021, reaching 3,752 million USD, before declining again to 3,179 million USD in 2022. Overall, despite some variability, the data suggests a downward shift from the initial 2017 level, with intermittent recovery periods.

Cash Operating Taxes

The cash operating taxes demonstrate some variability but generally display a less pronounced downward pattern compared to the income tax provision. Beginning at 3,463 million USD in 2017, there is an upward shift to 3,833 million USD in 2018, followed by a sharp drop to 2,626 million USD in 2019. From 2019 onward, values stabilize somewhat, with slight increases to 2,686 million USD in 2020 and 2,838 million USD in 2021. However, a considerable increase is observed in 2022, reaching 3,678 million USD, nearly returning to the 2017 level. This indicates fluctuating cash tax payments with a strong recovery in the final recorded year.

Comparative Insights

While both income tax provision and cash operating taxes fluctuate throughout the period, the income tax provision exhibits a more defined declining trend from 2017 to 2022 despite occasional rises. Conversely, cash operating taxes are more volatile, with a significant dip in the middle years but a marked rebound by 2022. The data may suggest differences in tax expense recognition versus actual cash tax payments, reflecting possible timing differences, changes in tax planning, or variations in tax liabilities versus cash outflows over time.

The analysis of the financial data reveals notable trends in the company's capital structure and debt levels over the six-year period under review.

Total Reported Debt & Leases

There is a general upward trend in total reported debt and leases from 2017 through 2022. The value initially decreased from 18,928 million USD in 2017 to 17,297 million USD in 2018, remaining relatively stable in 2019 at 17,430 million USD. However, a significant increase is observed in 2020, where debt and leases rose sharply to 24,640 million USD. Following this peak, the debt level decreased somewhat in 2021 to 21,551 million USD but increased again in 2022 to 22,970 million USD. This suggests an increased reliance on debt financing particularly beginning in 2020, likely influenced by external factors impacting liquidity needs or strategic financing decisions during that period.

Equity

Equity demonstrates a steady increase from 32,760 million USD in 2017 to a peak of 37,589 million USD in 2021, followed by a slight decline to 35,581 million USD in 2022. This upward trend until 2021 indicates consistent growth in shareholders’ equity, possibly driven by retained earnings or capital contributions. The minor decrease in 2022 may reflect changes such as share repurchases, dividend payments, or fluctuations in comprehensive income.

Invested Capital

Invested capital shows some variability over the period, with an initial decrease from 51,080 million USD in 2017 to 47,578 million USD in 2018. It then rises to 50,974 million USD in 2019, followed by a marked increase to 61,524 million USD in 2020. After a slight decrease and stabilization, invested capital remains fairly steady at approximately 60,800 million USD in 2021 and 60,981 million USD in 2022. The significant jump in 2020 aligns with the increase in debt, suggesting expanded investment activity or asset acquisitions funded partially through increased borrowing.

Overall, the data reflects an increased financial leverage beginning in 2020, alongside growth in invested capital. Equity growth has been steady but exhibits a slight contraction in the final year, which merits monitoring in view of the rising debt levels. These patterns indicate strategic financial management responding to evolving operational or market conditions during the timeframe analyzed.

The period between September 30, 2017, and September 30, 2022, demonstrates significant fluctuations in economic profit and the economic spread ratio. Invested capital exhibits a more moderate pattern of change over the same timeframe.

Economic Profit

Economic profit increased substantially from 2017 to 2019, rising from US$937 million to US$4,472 million. A considerable decrease was then observed in 2020, with economic profit falling to US$1,930 million. Subsequent years saw recoveries, reaching US$3,568 million in 2021 and further increasing to US$5,706 million in 2022. This indicates a volatile performance in value creation, with a peak in 2019 followed by a dip and then a return to growth.

Invested Capital

Invested capital decreased from US$51,080 million in 2017 to US$47,578 million in 2018. It then experienced a moderate increase, reaching US$50,974 million in 2019. A more substantial rise occurred between 2019 and 2020, with invested capital reaching US$61,524 million. The following two years saw relatively stable levels, at US$60,806 million in 2021 and US$60,981 million in 2022. The overall trend suggests a period of capital expansion followed by stabilization.

Economic Spread Ratio

The economic spread ratio mirrored the fluctuations in economic profit. It increased from 1.83% in 2017 to 3.68% in 2018, then experienced a significant surge to 8.77% in 2019. A substantial decline followed in 2020, with the ratio falling to 3.14%. The ratio recovered to 5.87% in 2021 and continued to increase, reaching 9.36% in 2022. This demonstrates a strong correlation between the economic spread ratio and the absolute level of economic profit, with the ratio amplifying the profit’s volatility. The 2022 value represents the highest observed ratio within the analyzed period.

The observed patterns suggest a business that is capable of generating substantial economic profit, but whose performance is subject to considerable variation. The increasing economic spread ratio in the later years of the period indicates improving efficiency in capital allocation and value creation, despite the earlier dip in 2020.

The period between September 30, 2017, and September 30, 2022, demonstrates significant fluctuations in economic profit and a corresponding impact on the economic profit margin. Economic profit exhibited an overall upward trend, though not consistently. Net revenues consistently increased over the observed period, with a notable acceleration in the final year.

Economic Profit

Economic profit began at US$937 million in 2017 and increased substantially to US$1,750 million in 2018. A significant surge occurred in 2019, reaching US$4,472 million. However, economic profit decreased to US$1,930 million in 2020, before recovering to US$3,568 million in 2021. The most recent year, 2022, saw a further increase, with economic profit reaching US$5,706 million – the highest value observed during the period.

Net Revenues

Net revenues showed a consistent year-over-year increase throughout the period. Growth progressed from US$18,358 million in 2017 to US$20,609 million in 2018, US$22,977 million in 2019, and US$21,846 million in 2020. Revenue continued to climb to US$24,105 million in 2021, culminating in a substantial increase to US$29,310 million in 2022. The rate of revenue growth accelerated notably between 2021 and 2022.

Economic Profit Margin

The economic profit margin mirrored the fluctuations in economic profit. Starting at 5.10% in 2017, it rose to 8.49% in 2018. A dramatic increase was observed in 2019, reaching 19.46%. The margin then declined to 8.83% in 2020, followed by a recovery to 14.80% in 2021. In 2022, the economic profit margin reached 19.47%, matching the peak observed in 2019. The margin’s movement suggests a strong correlation with the absolute level of economic profit, and a growing ability to translate revenue increases into economic profit.

The observed volatility in economic profit, despite consistent revenue growth, suggests potential fluctuations in the cost of capital or operational expenses. The strong performance in 2019 and 2022, coupled with the recent revenue acceleration, indicates a period of enhanced profitability and efficient capital allocation.