DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
Two-Component Disaggregation of ROE
Procter & Gamble Co., decomposition of ROE
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Return on Assets (ROA)
- The return on assets demonstrated a significant upward trend from 3.39% in 2019 to a peak of 12.58% in 2022. After 2022, it exhibited slight fluctuations, settling at 12.16% in 2024, indicating a period of stable asset profitability after initial growth.
- Financial Leverage
- Financial leverage showed moderate variability across the observed period. It increased from 2.44 in 2019 to 2.59 in 2020, followed by a general decline to 2.43 by 2024. This suggests a gradual reduction in the use of debt relative to equity starting from 2020, which could reflect a cautious approach towards financial risk.
- Return on Equity (ROE)
- Return on equity experienced substantial improvement, rising sharply from 8.26% in 2019 to a high of 31.64% in 2022. Thereafter, it exhibited a minor decline to 29.59% in 2024 while maintaining elevated levels compared to the initial year. The trend illustrates strong shareholder profitability with some stabilization in recent years.
Three-Component Disaggregation of ROE
Procter & Gamble Co., decomposition of ROE
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Net Profit Margin
- The net profit margin experienced a significant increase from 5.76% in 2019 to 18.36% in 2020, remaining relatively stable in the subsequent years. From 2020 through 2024, the margin fluctuated slightly but maintained a level near 18%, with a minor declining trend seen towards 17.7% in 2024. This indicates enhanced profitability since 2020, with marginal erosion in recent years.
- Asset Turnover
- Asset turnover showed a consistent upward trend over the period. Starting at 0.59 in both 2019 and 2020, it gradually increased each year to 0.69 by 2024. This reflects a steady improvement in the efficiency with which the company utilizes its assets to generate revenue.
- Financial Leverage
- Financial leverage exhibited somewhat stable behavior with minor fluctuations. It rose from 2.44 in 2019 to a peak of 2.59 in 2020, followed by a slight decrease and stabilization around 2.5 to 2.6 in subsequent years, ending at 2.43 in 2024. Overall, leverage remained consistent without notable increase or decrease, suggesting stable use of debt relative to equity.
- Return on Equity (ROE)
- ROE showed a robust upward trajectory from 8.26% in 2019 to a peak of 31.64% in 2022. Although it slightly decreased to 29.59% by 2024, the level remained substantially higher than the initial year. This strong performance aligns with improvements in profit margin and asset turnover, indicating effective management of equity capital to generate earnings.
Five-Component Disaggregation of ROE
Procter & Gamble Co., decomposition of ROE
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Tax Burden
- The tax burden ratio exhibited a notable increase from 0.65 in June 2019 to 0.83 in June 2020, after which it stabilized around 0.80 to 0.82 through June 2024. This indicates an initial rise in the proportion of earnings retained after taxes, maintaining a relatively consistent level thereafter.
- Interest Burden
- The interest burden ratio remained relatively stable over the analyzed period, fluctuating slightly between 0.92 and 0.98. This suggests steady management of interest expenses relative to earnings before interest and taxes, with no significant shifts in interest costs impacting profitability.
- EBIT Margin
- The EBIT margin showed a substantial increase from 9.62% in June 2019 to above 22% from June 2020 onwards. This improvement indicates enhanced operational efficiency and profitability, with margins consistently maintained in the range of 22.87% to 23.74%.
- Asset Turnover
- Asset turnover improved gradually from 0.59 in 2019 and 2020 to 0.69 by June 2024. This trend reflects increasing efficiency in utilizing assets to generate revenue over the five-year span.
- Financial Leverage
- Financial leverage displayed minor fluctuations, increasing slightly from 2.44 in 2019 to a peak of 2.59 in 2020, then generally declining to 2.43 by 2024. This indicates a relatively stable reliance on debt financing, with a modest reduction in leverage in recent years.
- Return on Equity (ROE)
- ROE experienced a significant rise from 8.26% in 2019 to a peak of 31.64% in 2022, followed by a slight decrease to 29.59% by 2024. This strong growth points to improved overall profitability and effective use of shareholder equity, although the slight decline toward the end of the period suggests some normalization.
Two-Component Disaggregation of ROA
Procter & Gamble Co., decomposition of ROA
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Net Profit Margin
- The net profit margin exhibited a significant increase from 5.76% in mid-2019 to a peak of 18.79% in mid-2021. Following this peak, the margin demonstrated a slightly declining trend, decreasing to 18.38% in mid-2022 and gradually tapering to 17.7% by mid-2024. Despite this modest reduction in recent years, the net profit margin remains substantially higher than the 2019 baseline, indicating improved profitability over the analyzed period.
- Asset Turnover
- The asset turnover ratio remained stable at 0.59 in both mid-2019 and mid-2020, followed by a steady upward trend. It increased to 0.64 in mid-2021, then continued to rise to 0.68 in mid-2022 and stabilized at that level through mid-2023. By mid-2024, it reached 0.69, indicating gradual improvement in the efficiency with which assets are utilized to generate sales over the years.
- Return on Assets (ROA)
- Return on assets showed a marked improvement from 3.39% in mid-2019 to double-digit figures by mid-2020, reaching 10.79%. This upward trend persisted, with ROA increasing to 11.99% in mid-2021 and further to 12.58% in mid-2022. Slight fluctuations occurred afterward, with a minor decrease to 12.13% in mid-2023, followed by a slight recovery to 12.16% in mid-2024. Overall, this reflects a sustained enhancement in asset profitability over the timeframe.
Four-Component Disaggregation of ROA
Procter & Gamble Co., decomposition of ROA
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Tax Burden
- The tax burden ratio shows a significant increase from 0.65 in 2019 to 0.83 in 2020. In subsequent years, it remains relatively stable, hovering around 0.80 by 2024, indicating a consistent level of tax impact on income over the latter periods.
- Interest Burden
- The interest burden ratio remains high and stable throughout the period, starting from 0.92 in 2019 and slightly increasing to 0.98 in 2022 before marginally declining to 0.95 in 2024. This suggests that the company maintains strong control over interest expenses relative to its earnings before interest and taxes.
- EBIT Margin
- The EBIT margin shows a marked improvement between 2019 and 2020, rising from 9.62% to 22.87%. It remains steady just above 22% through 2024, indicating sustained operational profitability and efficient cost management after the initial gain.
- Asset Turnover
- The asset turnover ratio remains flat at 0.59 from 2019 to 2020 but then consistently increases each year, reaching 0.69 by 2024. This trend reflects improving efficiency in utilizing assets to generate revenue over the analyzed period.
- Return on Assets (ROA)
- The ROA experiences a strong upward trend, increasing from 3.39% in 2019 to a peak of 12.58% in 2022 before a slight decline to a stable 12.16% in 2024. This suggests enhanced profitability relative to overall asset base, in line with improved EBIT margin and asset turnover ratios.
Disaggregation of Net Profit Margin
Procter & Gamble Co., decomposition of net profit margin ratio
Based on: 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30).
- Tax Burden
- The tax burden ratio displays a marked increase from 0.65 in mid-2019 to a peak level of approximately 0.83 in mid-2020, after which it consistently remains around 0.8 through mid-2024. This suggests a significant change in tax impact on earnings starting in 2020, stabilizing at a higher tax relative to pre-2020 levels.
- Interest Burden
- This ratio shows a gradual improvement, moving from 0.92 in mid-2019 to 0.98 by mid-2022, followed by a slight decline to 0.95 by mid-2024. The trend indicates improved interest expense management over the first three years, with a minor relaxation afterward but generally maintaining a healthy interest coverage level.
- EBIT Margin
- There is a substantial increase in EBIT margin from 9.62% in mid-2019 to a high of about 23.74% in mid-2021. Post-2021, the margin stabilizes around 23%, maintaining consistent operational profitability through to mid-2024, which implies strengthened earnings before interest and taxes over the period.
- Net Profit Margin
- The net profit margin reflects a similar upward trajectory, rising significantly from 5.76% in mid-2019 to close to 18.79% in mid-2021. From there, a slight declining trend is observed, with margins reducing gradually to 17.7% by mid-2024. Despite the minor decrease, net profitability remains substantially higher than the levels recorded prior to 2020.