Waste Management Inc. (NYSE:WM)

Return on Assets (ROA)

The Return on Assets exhibited a declining trend from 8.93% in 2017 to 5.1% in 2020, indicating a reduction in the efficiency with which the company utilized its assets to generate earnings. However, in 2021, there was a slight recovery to 6.24%, suggesting some improvement in asset profitability.

Financial Leverage

Financial leverage remained relatively stable from 2017 through 2018, around 3.6, but then increased gradually to 4.08 by 2021. This incremental rise indicates a growing reliance on debt or other forms of financing, which potentially increases financial risk but may also amplify returns to equity holders.

Return on Equity (ROE)

Return on Equity followed a decreasing pattern similar to ROA, declining from 32.38% in 2017 to a low of 20.08% in 2020. Despite this fall, ROE rebounded to 25.49% in 2021. The decline and subsequent partial recovery in ROE signal fluctuations in the company’s ability to generate profits from shareholders' equity, which could be influenced by variations in asset utilization, profitability, or financial leverage.

Net Profit Margin

The net profit margin demonstrates a declining trend from 2017 to 2020, dropping from 13.46% to 9.83%. Although a slight increase to 10.13% is observed in 2021, the overall trajectory indicates diminishing profitability relative to sales over the five-year period.

Asset Turnover

Asset turnover decreases from 0.66 in 2017 and 2018 to a low of 0.52 in 2020, suggesting reduced efficiency in utilizing assets to generate sales. A recovery to 0.62 in 2021 indicates some improvement in asset utilization but still remains below the earlier levels.

Financial Leverage

Financial leverage exhibits a gradual increase from 3.63 in 2017 to 4.08 in 2021. This upward trend suggests the company has incrementally increased its use of debt or liabilities relative to equity, possibly to finance growth or operations.

Return on Equity (ROE)

ROE declines significantly from 32.38% in 2017 to 20.08% in 2020, reflecting reduced overall profitability for shareholders. However, a rebound to 25.49% in 2021 indicates partial recovery in generating returns on equity capital, likely influenced by improved profit margin and asset turnover performance alongside increased financial leverage.

Overall Insight

The data suggests the company faced challenges in maintaining profitability and operational efficiency from 2017 through 2020, as evidenced by declining net profit margin, asset turnover, and ROE. Increased financial leverage during this time may have attempted to offset performance dips but likely contributed to higher risk. The slight improvements across key metrics in 2021 hint at a tentative recovery phase, though profitability and efficiency have yet to return to earlier peak levels.

Tax Burden

The tax burden ratio exhibits a gradual decline over the observed period, decreasing from 0.89 in 2017 to 0.77 in 2021. This trend indicates an improvement in after-tax profitability, as the company is retaining a larger portion of its earnings after taxes each year.

Interest Burden

The interest burden remains relatively stable, fluctuating slightly between 0.81 and 0.86 during the five years. It experienced a dip to 0.81 in 2020 but returned to 0.86 in 2021. This stability suggests consistent management of interest expenses relative to operating profit.

EBIT Margin

The EBIT margin shows a decreasing trend, falling from 17.67% in 2017 to 15.19% in 2021. There is a noticeable drop from 2018 onwards, pointing to a reduction in operating profitability that could be a result of increased operational costs or competitive pressures impacting earnings before interest and taxes.

Asset Turnover

Asset turnover declined from 0.66 in 2017 and 2018 to a low of 0.52 in 2020, before recovering somewhat to 0.62 in 2021. This suggests a reduction in the efficiency with which the company used its assets to generate revenue, with partial improvement in the last year reported.

Financial Leverage

Financial leverage increased steadily, moving from 3.63 in 2017 to 4.08 in 2021. This rising trend indicates a growing use of debt relative to equity, potentially to finance growth or operations. However, higher leverage can also imply increased financial risk.

Return on Equity (ROE)

ROE declined significantly from 32.38% in 2017 to a low of 20.08% in 2020, before rebounding to 25.49% in 2021. The downward trend correlates with decreasing EBIT margin and asset turnover, despite the increased financial leverage which may have helped cushion the decline. The recent improvement in ROE likely reflects enhanced profitability or efficiency measures.

The financial data reveals discernible trends over the five-year period ending in 2021. Key profitability and efficiency metrics demonstrate a general pattern of decline followed by partial recovery.

Net Profit Margin

The net profit margin exhibited a downward trajectory from 13.46% in 2017 to a low of 9.83% in 2020, indicating decreasing profitability relative to sales over these years. However, there was a slight uptick to 10.13% in 2021, suggesting a modest improvement in operational efficiency or cost control after the decline.

Asset Turnover

Asset turnover, representing the efficiency of asset use in generating revenue, remained stable at 0.66 ratios in 2017 and 2018, then experienced a noticeable drop to 0.56 in 2019, followed by a further decline to 0.52 in 2020. This trend points to diminishing asset utilization efficiency during this period. In 2021, asset turnover rebounded somewhat to 0.62, signaling a recovery in the company’s ability to generate sales from its asset base.

Return on Assets (ROA)

ROA declined steadily from 8.93% in 2017 to 5.1% in 2020, underscoring a reduction in the overall effectiveness with which the company employed its assets to produce net income. The 2021 figure of 6.24% indicates a partial recovery, though the level remains substantially below the earlier years, aligned with trends observed in profit margin and asset turnover.

Collectively, the data reflect an overall weakening in profitability and operational efficiency from 2017 through 2020, followed by some improvement in 2021. This pattern may be indicative of external challenges faced during the earlier years, with signs of strategic or market-driven recovery beginning in the most recent period analyzed.

The analysis of key financial ratios over the five-year period reveals several notable trends regarding profitability and efficiency.

Tax Burden

The tax burden ratio exhibits a gradual decline from 0.89 in 2017 to 0.77 in 2021. This downward trend indicates a reduction in the proportion of earnings paid as taxes, which may positively affect net income retention over time.

Interest Burden

The interest burden ratio remains relatively stable across the years, fluctuating slightly around the 0.81 to 0.86 range. This stability suggests a consistent impact of interest expenses on earnings before taxes throughout the period.

EBIT Margin

The EBIT margin shows a decreasing trend, beginning at 17.67% in 2017 and declining to 15.19% by 2021. This decline reflects a reduction in operating profitability, which might be attributed to rising costs or pricing pressures.

Asset Turnover

Asset turnover initially remains steady at 0.66 in 2017 and 2018 but declines significantly to 0.52 in 2020 before recovering somewhat to 0.62 in 2021. This variability indicates changes in how effectively the company uses its assets to generate sales, with a dip in operational efficiency around 2020.

Return on Assets (ROA)

ROA decreases substantially from 8.93% in 2017 to a low of 5.1% in 2020, followed by a modest rebound to 6.24% in 2021. This pattern reflects the combined influence of declining operating margins and fluctuating asset utilization on overall asset profitability.

Overall, the observed trends point toward a weakening in operating profitability and asset efficiency during the middle years of the period, with some recovery noted in the final year. The consistent decrease in tax burden could partially offset the negative impacts on net profitability. The stable interest burden suggests no significant change in financing costs relative to earnings before tax over these years.

Tax Burden Trend

The tax burden ratio demonstrates a consistent downward trend over the five-year period, decreasing from 0.89 in 2017 to 0.77 by the end of 2021. This indicates an increasing proportion of income retained after taxes, suggesting improved tax efficiency or changes in tax regulations benefiting the company.

Interest Burden Stability

The interest burden ratio shows relative stability across the years, fluctuating narrowly between 0.81 and 0.86. Notably, there was a slight dip in 2019 and 2020 to 0.82 and 0.81 respectively, followed by a rebound to 0.86 in 2021, indicating that the company’s interest expenses relative to earnings before interest and taxes remained manageable and stable, with some recovery in 2021.

EBIT Margin Movement

The EBIT margin exhibited a declining trend, falling from 17.67% in 2017 to 15.19% in 2021. The most significant decrease occurred between 2018 and 2020, with a reduction from 18.52% to 15.44%. This suggests a gradual reduction in operating profitability relative to revenue, possibly due to increased operating costs or competitive pressures affecting operational efficiency.

Net Profit Margin Decline and Slight Recovery

The net profit margin followed a downward path from 13.46% in 2017 to 9.83% in 2020, indicating decreasing overall profitability. However, in 2021, there was a modest recovery to 10.13%. The downward trend until 2020 aligns with the declines in EBIT margin and suggests challenges in managing costs or expenses beyond operating profit, while the slight improvement in 2021 may reflect some stabilizing factors or improvement in non-operating elements.

Overall Financial Performance Insights

Collectively, the data portray a company experiencing gradual reductions in profitability at both operating and net levels over the observed period, mitigated by stable interest expense management and more favorable tax conditions. While operating efficiency appears to have weakened, efforts to maintain interest obligations were consistent, and tax optimization might have softened the impact on net profitability. The slight recovery in net profit margin in the final year hints at potential stabilization or early signs of financial improvement.