SM Energy Co (SM)

Operating return on assets (Operating ROA)

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Operating income	US$ in thousands	986,906	1,579,480	209,123	-1,068,950	-69,968
Total assets	US$ in thousands	6,379,980	5,716,040	5,233,980	4,976,430	6,292,230
Operating ROA		15.47%	27.63%	4.00%	-21.48%	-1.11%

December 31, 2023 calculation

Operating ROA = Operating income ÷ Total assets
= $986,906K ÷ $6,379,980K
= 15.47%

Operating return on assets (operating ROA) is a key financial ratio that measures a company's ability to generate operating profits from its assets. Looking at the trend for SM Energy Co over the past five years, we observe fluctuations in the operating ROA:

1. In 2023, the operating ROA was 15.47%, showing a decline from the previous year's level of 27.76%. This decrease could indicate a decrease in operating efficiency or profitability relative to the asset base.

2. The company experienced a significant improvement in operating ROA in 2022 compared to 2021, with a substantial increase from 4.66% to 27.76%. This surge suggests improved operational performance and profitability.

3. In 2021, the operating ROA was 4.66%, indicating a moderate return on assets in that year.

4. The operating ROA in 2020 was negative at -1.07%, signaling that the company's operating profits were insufficient to cover the asset base, potentially raising concerns about operational efficiency or asset utilization.

5. Similarly, in 2019, the operating ROA was also negative at -0.59%, reflecting a similar issue of inadequate profitability generated from assets in that year.

Overall, the trend in SM Energy Co's operating ROA shows fluctuating performance levels over the past five years, with a mix of positive and negative returns. It is essential for the company to focus on improving profitability and operational efficiency to ensure sustainable growth and value creation for its stakeholders.