Waste Management Inc. (NYSE:WM)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited fluctuations over the analyzed periods. It increased from 1,952 million US dollars in 2017 to a peak of 2,286 million in 2018, followed by a decline to 2,119 million in 2019. Thereafter, it continued to decrease in 2020 to 2,018 million but saw a slight recovery in 2021, reaching 2,064 million.

Cost of Capital

The cost of capital showed moderate variability, starting at 10.74% in 2017 and rising slightly to 11.09% in 2018. It then decreased gradually to 10.33% in 2020 before increasing again to 10.88% in 2021. Overall, the cost of capital remained within a narrow range between approximately 10.3% and 11.1% during the period.

Invested Capital

Invested capital demonstrated a consistent upward trend from 17,686 million US dollars in 2017 to a peak of 23,729 million in 2020. However, in 2021, a slight reduction was observed, with invested capital falling to 22,932 million. This suggests significant growth in capital investment until 2020, followed by a minor contraction.

Economic Profit

Economic profit showed considerable volatility and a negative trend in most years. Initially positive at 53 million in 2017, it rose sharply to 241 million in 2018. Subsequently, it turned negative in 2019, registering a loss of 332 million, and worsened in 2020 and 2021, with losses of 433 million and 431 million, respectively. This indicates that despite overall profitability, the company's returns did not sufficiently exceed its cost of capital in the later years, resulting in deteriorating economic value creation.

The financial data indicates fluctuations and trends in the profitability measures of the entity over the five-year period ending December 31, 2021.

Net Income Attributable to the Company

The net income shows a declining trend from 2017 through 2020, starting at 1,949 million US dollars in 2017, slightly decreasing to 1,925 million in 2018, followed by a more pronounced decrease to 1,670 million in 2019 and further down to 1,496 million in 2020. However, there is a rebound in 2021, with net income rising to 1,816 million, indicating a recovery after the decline in prior years.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures reveal a different pattern. Starting at 1,952 million US dollars in 2017, NOPAT increased substantially in 2018 to 2,286 million, peaking in that year. Afterward, it declined over the next two years to 2,119 million in 2019 and 2,018 million in 2020. By 2021, NOPAT experienced a slight increase to 2,064 million, indicating some stabilization or modest recovery in operating profitability after taxes.

In summary, while both net income and NOPAT exhibit declines starting around 2018 or 2019, net income shows a more significant decrease and a notable rebound by 2021, whereas NOPAT peaked earlier in 2018, followed by declines with a slight recovery by 2021. These patterns may reflect variations in non-operating income, expenses, taxes, or other adjustments impacting net income differently compared to operating profit.

The financial data over the five-year period ending December 31, 2021, shows distinct trends in both income tax expense and cash operating taxes.

Income Tax Expense

Income tax expense experienced a general increase from 2017 to 2021, with fluctuations during the intermediate years. The value rose significantly from $242 million in 2017 to $453 million in 2018. It then slightly decreased to $434 million in 2019 and further declined to $397 million in 2020. However, in 2021, there was a notable increase to $532 million, marking the highest expense in the period analyzed.

Cash Operating Taxes

Cash operating taxes demonstrated a downward trend from 2017 through 2020, followed by a sharp rise in 2021. Specifically, cash operating taxes decreased from $626 million in 2017 to $511 million in 2018 and further to $424 million in 2019. This downward trajectory continued with a reduction to $324 million in 2020. In 2021, this trend reversed dramatically as cash operating taxes surged to $689 million, surpassing all previous years in the data set.

Overall, while the income tax expense shows variability with an eventual upward movement to reach its peak in 2021, cash operating taxes reveal a more pronounced downward trend until 2020, followed by a significant increase in the last year. The contrasting movements in these two tax-related financial items in 2021 may indicate changes in tax policy application, operational performance, or other tax-related accounting factors impacting the company’s tax obligations.

The financial data reveals distinct trends in key balance sheet components over the five-year period ending December 31, 2021.

Total Reported Debt & Leases

The total reported debt and leases exhibit an overall upward trend from 2017 through 2020, increasing from approximately $9,976 million in 2017 to a peak near $14,326 million in 2020. This represents a significant increase of roughly 43% over three years. In 2021, a slight decline to $13,928 million is noted, indicating a minor reduction in indebtedness or lease obligations after reaching the high point the prior year.

Total Stockholders’ Equity

Stockholders' equity also shows a general increase over the reviewed period, rising from about $6,019 million in 2017 to a maximum of $7,452 million in 2020. This growth suggests accumulated retained earnings and possible capital contributions enhancing the company’s net asset base. However, equity decreases slightly in 2021 to $7,124 million, indicating some erosion following the peak, which could be due to net losses, dividends, or other equity-reducing activities.

Invested Capital

Invested capital follows a similar pattern to total debt and equity, with steady growth from $17,686 million in 2017 to $23,729 million in 2020. This growth, amounting to approximately 34%, reflects increased deployment of financial resources into the company's operations, likely contributing to expansion or asset acquisition. The figure slightly contracts to $22,932 million in 2021, aligning with the modest declines in both debt and equity components.

Overall, the data depicts growth in the company’s financial size and capital structure through 2020, with a slight retrenchment in debt, equity, and invested capital during 2021. This trend suggests a period of expansion followed by cautious tightening or normalization of the balance sheet in the most recent year.

Economic Profit

The economic profit shows a significant decline over the analyzed periods. Starting at 53 million USD in 2017, it peaked sharply to 241 million USD in 2018 before declining drastically into negative territory from 2019 onward. The values remain substantially negative through 2019 to 2021, with figures of -332 million, -433 million, and -431 million USD respectively, indicating persistent economic losses during these years.

Invested Capital

The invested capital has followed an overall upward trend from 2017 to 2021. Beginning at 17,686 million USD in 2017, it increased steadily to 22,932 million USD by the end of 2021. Despite slight fluctuations between 2020 and 2021, the general pattern reflects growing capital investment over the five-year period.

Economic Spread Ratio

The economic spread ratio started at a modest positive value of 0.3% in 2017, rising to 1.31% in 2018, which aligns with the peak in economic profit seen in the same year. However, from 2019 onwards, it turns sharply negative, reaching -1.47% in 2019 and further deteriorating to -1.83% in 2020 and -1.88% in 2021. This trend indicates that the returns on invested capital fell below the cost of capital in these latter years, confirming the negative economic profit outcomes.

Overall Insights

The data reveals a period of favorable economic performance in 2018 followed by several years of economic decline. While capital investment increased steadily, the company failed to generate adequate returns in the subsequent years to cover the cost of capital, as evidenced by negative economic profit and spread ratios. These conditions reflect potential operational inefficiencies or challenging market conditions impacting profitability despite increased invested capital.

Economic Profit

The economic profit exhibited a significant decline over the analyzed periods. Initially, it showed a positive value of 53 million US dollars at the end of 2017, increasing substantially to 241 million in 2018. However, this trend reversed sharply starting from 2019, with economic profit turning negative and remaining below zero through 2019 to 2021. The values reported were -332 million in 2019, -433 million in 2020, and slightly improving but still negative at -431 million in 2021. This pattern indicates a deteriorating profitability position after 2018, raising concerns about the company's ability to generate profits above its cost of capital in recent years.

Adjusted Operating Revenues

The adjusted operating revenues showed a steady upward trend over the five-year span. Beginning at 14,495 million US dollars in 2017, revenues incrementally increased every year, reaching 14,933 million in 2018, 15,467 million in 2019, and though a slight dip to 15,223 million was observed in 2020, the year 2021 recorded a significant rise to 17,963 million. This suggests that despite challenges impacting profitability, the company expanded its revenue base consistently, with a notable acceleration in revenue growth in the most recent year.

Economic Profit Margin

The economic profit margin closely mirrored the trend of economic profit itself, reflecting the company's profitability relative to its revenue. It started at a positive 0.36% in 2017 and improved markedly to 1.61% in 2018. Following this, the margin became negative from 2019 onwards, with -2.15% in 2019, deteriorating further to -2.85% in 2020, and slightly recovering to -2.4% in 2021. The negative margins during the last three years indicate that the company has been generating losses from an economic profit perspective, despite growth in revenues.

Summary of Financial Trends

The data reveals a dichotomy between increasing revenue and declining economic profitability. While the company succeeded in growing its top-line figures nearly every year, its ability to convert revenues into economic profit worsened dramatically after 2018. The persistent negative economic profit and margins over three consecutive years imply that costs, capital charges, or other economic expenses may have increased disproportionately or efficiency declined. The slight improvements seen in 2021 compared to 2020, though still negative, could suggest initial steps toward addressing these challenges, but overall, the company faces significant profitability concerns despite revenue expansion.