Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Etsy Inc., profitability ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
The profitability profile between 2017 and 2021 demonstrates a significant upward trajectory in efficiency and return metrics, characterized by a notable acceleration in performance starting in 2020.
- Gross Profit Margin
- A general increase is observed, rising from 65.78% in 2017 to 71.90% in 2021. The margin peaked at 73.07% in 2020, indicating a strong ability to maintain cost of sales relative to revenue growth.
- Operating Profit Margin
- Substantial growth occurred in operating efficiency, with the margin expanding from 2.70% in 2017 to 20.00% in 2021. A peak of 24.57% was reached in 2020, reflecting a significant scaling of operations and improved management of operating expenses.
- Net Profit Margin
- The net margin exhibited a U-shaped trend, declining from 18.54% in 2017 to a low of 11.72% in 2019, before recovering strongly to reach 21.19% by 2021.
- Return on Equity (ROE)
- An exponential increase in ROE is evident, climbing from 20.61% in 2017 to 78.51% in 2021. This sharp acceleration, particularly after 2019, suggests highly efficient utilization of shareholder equity to generate profit.
- Return on Assets (ROA)
- ROA followed a fluctuating pattern, decreasing from 13.51% in 2017 to a minimum of 6.22% in 2019, followed by a recovery to 12.88% in 2021, signaling a restoration of asset productivity.
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Gross Profit Margin
Etsy Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 1,674,602) | 1,260,880) | 547,343) | 412,931) | 290,245) | |
| Revenue | 2,329,114) | 1,725,625) | 818,379) | 603,693) | 441,231) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 71.90% | 73.07% | 66.88% | 68.40% | 65.78% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Amazon.com Inc. | 42.03% | — | — | — | — | |
| Home Depot Inc. | 33.95% | — | — | — | — | |
| Lowe’s Cos. Inc. | 33.01% | — | — | — | — | |
| TJX Cos. Inc. | 23.66% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 1,674,602 ÷ 2,329,114 = 71.90%
2 Click competitor name to see calculations.
The financial trajectory between 2017 and 2021 indicates substantial expansion in both revenue and gross profit. Revenue increased from US$ 441.2 million in 2017 to US$ 2.33 billion by the end of 2021, reflecting a strong and consistent growth trend. Correspondingly, gross profit grew from US$ 290.2 million to US$ 1.67 billion over the same period.
- Gross Profit Margin Trends
- The gross profit margin exhibited an overall upward trajectory, starting at 65.78% in 2017 and concluding at 71.90% in 2021. A significant peak occurred in 2020, where the margin reached 73.07%, marking the highest point of profitability efficiency within the analyzed timeframe.
- Revenue and Profitability Correlation
- A strong positive correlation is observed between revenue scaling and gross profit. The most aggressive growth occurred between 2019 and 2020, during which revenue more than doubled, while the gross profit margin expanded by 6.19 percentage points, suggesting strong operating leverage during this period.
- Recent Margin Stabilization
- Following the peak in 2020, a slight contraction in the gross profit margin was observed in 2021, descending to 71.90%. Despite this marginal decrease, the margin remains significantly higher than the levels recorded between 2017 and 2019, indicating a sustained improvement in the cost of goods sold relative to total revenue.
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Operating Profit Margin
Etsy Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Income from operations | 465,732) | 424,009) | 88,761) | 74,786) | 11,896) | |
| Revenue | 2,329,114) | 1,725,625) | 818,379) | 603,693) | 441,231) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 20.00% | 24.57% | 10.85% | 12.39% | 2.70% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Amazon.com Inc. | 5.30% | — | — | — | — | |
| Home Depot Inc. | 13.84% | — | — | — | — | |
| Lowe’s Cos. Inc. | 10.77% | — | — | — | — | |
| TJX Cos. Inc. | 1.81% | — | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 7.38% | — | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Consumer Discretionary | 8.71% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenue
= 100 × 465,732 ÷ 2,329,114 = 20.00%
2 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by substantial growth in both top-line revenue and operational profitability. A consistent upward trajectory in revenue provided the foundation for significant expansion in operating income, though the operating profit margin experienced periods of volatility and a peak in 2020.
- Revenue Growth and Operational Scale
- Revenue demonstrated an aggressive growth pattern, increasing from US$ 441.2 million in 2017 to US$ 2.33 billion in 2021. The most significant acceleration occurred between 2019 and 2020, where revenue grew by approximately 110%, indicating a rapid scaling of operations.
- Operating Profit Margin Analysis
- The operating profit margin expanded from a baseline of 2.70% in 2017 to 12.39% in 2018, followed by a slight contraction to 10.85% in 2019. A peak margin of 24.57% was achieved in 2020, representing the highest point of operational efficiency in the period. In 2021, the margin normalized to 20.00%, suggesting that operating expenses increased at a faster rate than operating income during the final year.
- Income from Operations Trajectory
- Absolute operating income grew exponentially, rising from US$ 11.9 million in 2017 to US$ 465.7 million in 2021. The sharpest increase took place between 2019 and 2020, where income from operations surged from US$ 88.8 million to US$ 424.0 million, reflecting strong operating leverage during that interval.
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Net Profit Margin
Etsy Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 493,507) | 349,246) | 95,894) | 77,491) | 81,800) | |
| Revenue | 2,329,114) | 1,725,625) | 818,379) | 603,693) | 441,231) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 21.19% | 20.24% | 11.72% | 12.84% | 18.54% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Amazon.com Inc. | 7.10% | — | — | — | — | |
| Home Depot Inc. | 9.74% | — | — | — | — | |
| Lowe’s Cos. Inc. | 6.51% | — | — | — | — | |
| TJX Cos. Inc. | 0.28% | — | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 7.21% | — | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Consumer Discretionary | 9.12% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net profit margin = 100 × Net income ÷ Revenue
= 100 × 493,507 ÷ 2,329,114 = 21.19%
2 Click competitor name to see calculations.
The financial performance from 2017 to 2021 is characterized by an initial period of margin compression followed by an aggressive expansion in both top-line revenue and bottom-line profitability.
- Revenue and Net Income Trajectory
- Revenue experienced consistent year-over-year growth, with a significant acceleration occurring between 2019 and 2020, when figures rose from 818.4 million to 1.7 billion. Net income followed a similar growth pattern, despite a marginal contraction in 2018, ultimately increasing from 81.8 million in 2017 to 493.5 million by the end of 2021.
- Net Profit Margin Fluctuations
- The net profit margin exhibited a U-shaped trend over the five-year period. A downward trend was observed from 2017 to 2019, with the margin declining from 18.54% to a low of 11.72%. This trend reversed sharply in 2020, with the margin increasing to 20.24%, and reaching a peak of 21.19% in 2021.
- Operational Leverage and Scalability
- The simultaneous increase in revenue and net profit margin between 2020 and 2021 suggests a period of high operational leverage. The ability to expand profitability to its highest level in the observed period while scaling the revenue base indicates that the company successfully optimized its cost structure and improved efficiency as it grew.
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Return on Equity (ROE)
Etsy Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 493,507) | 349,246) | 95,894) | 77,491) | 81,800) | |
| Stockholders’ equity | 628,619) | 742,424) | 406,634) | 400,898) | 396,894) | |
| Profitability Ratio | ||||||
| ROE1 | 78.51% | 47.04% | 23.58% | 19.33% | 20.61% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Amazon.com Inc. | 24.13% | — | — | — | — | |
| Home Depot Inc. | 390.00% | — | — | — | — | |
| Lowe’s Cos. Inc. | 406.05% | — | — | — | — | |
| TJX Cos. Inc. | 1.55% | — | — | — | — | |
| ROE, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 35.05% | — | — | — | — | |
| ROE, Industry | ||||||
| Consumer Discretionary | 33.71% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 493,507 ÷ 628,619 = 78.51%
2 Click competitor name to see calculations.
An analysis of the financial performance from 2017 to 2021 reveals a significant upward trajectory in profitability, characterized by an exponential increase in the return on equity (ROE).
- Net Income Trends
- Between 2017 and 2019, net income remained relatively stable, fluctuating between 77.5 million and 95.9 million US dollars. A substantial acceleration occurred in 2020, where net income surged to 349.2 million US dollars, followed by further growth to 493.5 million US dollars by the end of 2021.
- Stockholders' Equity Dynamics
- Equity grew modestly from 2017 to 2019, maintaining a level near 400 million US dollars. A sharp increase was observed in 2020, with equity reaching 742.4 million US dollars. However, 2021 saw a contraction in stockholders' equity to 628.6 million US dollars.
- Return on Equity (ROE) Interpretation
- The ROE exhibited a stable range between 19.33% and 23.58% during the initial three-year period. A pivotal shift occurred in 2020, with the ratio climbing to 47.04%. By 2021, the ROE reached a peak of 78.51%. This rapid acceleration is attributable to the combined effect of increasing net income and a decreasing equity base in the final year, which significantly amplified the return generated on shareholder investments.
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Return on Assets (ROA)
Etsy Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 493,507) | 349,246) | 95,894) | 77,491) | 81,800) | |
| Total assets | 3,831,809) | 2,404,489) | 1,542,352) | 901,851) | 605,583) | |
| Profitability Ratio | ||||||
| ROA1 | 12.88% | 14.52% | 6.22% | 8.59% | 13.51% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Amazon.com Inc. | 7.93% | — | — | — | — | |
| Home Depot Inc. | 18.23% | — | — | — | — | |
| Lowe’s Cos. Inc. | 12.49% | — | — | — | — | |
| TJX Cos. Inc. | 0.29% | — | — | — | — | |
| ROA, Sector | ||||||
| Consumer Discretionary Distribution & Retail | 9.17% | — | — | — | — | |
| ROA, Industry | ||||||
| Consumer Discretionary | 7.99% | — | — | — | — | |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 493,507 ÷ 3,831,809 = 12.88%
2 Click competitor name to see calculations.
The analysis of profitability ratios between 2017 and 2021 reveals a fluctuating trend in asset utilization efficiency. While net income and total assets both exhibited significant growth over the five-year period, the relationship between these two metrics resulted in a non-linear progression of the Return on Assets (ROA).
- Return on Assets (ROA) Trend
- A downward trend in ROA was observed from 2017 to 2019, with the ratio declining from 13.51% to a period low of 6.22%. This compression indicates that during this phase, the growth in the asset base significantly outpaced the growth in net income. However, a sharp reversal occurred in 2020, where ROA peaked at 14.52%, before experiencing a slight correction to 12.88% in 2021.
- Net Income Growth Dynamics
- Net income remained relatively stable between 2017 and 2019, fluctuating between 77.4 million and 95.9 million US dollars. A substantial acceleration in profitability occurred in 2020, with net income increasing to 349.2 million US dollars, followed by a further increase to 493.5 million US dollars in 2021. This surge in earnings was the primary driver behind the recovery of the ROA in the latter part of the period.
- Asset Base Expansion
- Total assets demonstrated aggressive and consistent growth throughout the analyzed timeframe, increasing from 605.6 million US dollars in 2017 to 3.8 billion US dollars by 2021. The rapid expansion of the balance sheet initially diluted the ROA; however, the scale of net income growth from 2020 onwards was sufficient to maintain high efficiency levels despite the larger asset base.
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