Smart Global Holdings Inc (SGH)

Return on assets (ROA)

		Aug 25, 2023	Aug 26, 2022	Aug 27, 2021	Aug 28, 2020	Aug 30, 2019
Net income	US$ in thousands	-187,526	66,557	21,310	-1,143	51,332
Total assets	US$ in thousands	1,505,960	1,572,060	1,344,800	786,608	704,137
ROA		-12.45%	4.23%	1.58%	-0.15%	7.29%

August 25, 2023 calculation

ROA = Net income ÷ Total assets
= $-187,526K ÷ $1,505,960K
= -12.45%

Return on assets (ROA) is a key financial ratio that measures a company's ability to generate profit from its assets. It is calculated by dividing the company's net income by its average total assets. A higher ROA indicates better utilization of assets to generate earnings.

Looking at the ROA trend of SMART Global Holdings Inc over the past five years, we observe significant fluctuations. In 2019, the company demonstrated a robust ROA of 7.29%, suggesting efficient asset utilization and strong profitability. This positive performance indicates that the company was effectively generating earnings relative to its asset base.

However, the subsequent year, 2020, saw a sharp decline in ROA to -0.15%, representing a negative return on assets. This decrease indicates a potential decrease in profitability relative to the asset base. Companies with a negative ROA may struggle to generate earnings from their assets, signaling potential inefficiencies in asset utilization.

In the following year, 2021, SMART Global Holdings Inc improved its ROA to 1.58%, suggesting a return to positive profitability relative to its assets. While this is an improvement from the previous year, the ROA remains relatively low, which may indicate that the company is not fully optimizing its asset base to generate earnings.

In 2022, the company achieved an ROA of 4.23%, indicating an increase in profitability from the previous year. This improvement suggests that SMART Global Holdings Inc may have enhanced its efficiency in leveraging its assets to generate earnings, reflecting a positive sign for investors and stakeholders.

The most recent financial data, from 2023, demonstrates a notable decline in ROA to -12.45%. This substantial negative ROA indicates a significant decrease in profitability relative to the asset base. It suggests potential challenges in generating earnings compared to the level of assets employed.

In summary, SMART Global Holdings Inc's ROA trend shows significant variability over the past five years, ranging from strong positive performance to notable declines and even negative returns. This fluctuation could indicate fluctuations in the company's ability to effectively generate earnings from its asset base. Investors and stakeholders should monitor the company's future ROA performance to assess its ability to effectively utilize its assets for profitability.