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.
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Analysis of Debt
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Two-Component Disaggregation of ROE
Fiserv Inc., decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × | |||
| Dec 31, 2019 | = | × | |||
| Dec 31, 2018 | = | × | |||
| Dec 31, 2017 | = | × |
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).
- Return on Assets (ROA)
- The return on assets shows a significant decline from 12.11% in 2017 to a low of 1.15% in 2019. After this marked drop, a moderate recovery trend is observed with gradual increases to 1.28% in 2020 and 1.75% in 2021. Overall, the data reflect a sharp decrease in asset profitability in the earlier years followed by a slow improvement in subsequent periods.
- Financial Leverage
- Financial leverage experienced notable fluctuations over the time span. It increased from 3.77 in 2017 to a peak of 4.91 in 2018, indicating a higher use of debt or liabilities relative to equity. This was followed by a substantial reduction to around 2.35 in 2019 and remained relatively stable thereafter, showing a slight rise to 2.46 in 2021. The trend suggests a shift toward a more conservative capital structure post-2018.
- Return on Equity (ROE)
- Return on equity followed a similar pattern to ROA with initially high values of 45.62% in 2017 and 51.77% in 2018. This was succeeded by a sharp decline to 2.71% in 2019, indicating a significant drop in earnings generated from shareholders' equity. Minor improvements are seen in 2020 and 2021, with ROE reaching 4.31% in the latest period. The overall pattern reveals a substantial reduction in equity profitability accompanied by a slight recovery.
Three-Component Disaggregation of ROE
Fiserv Inc., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × |
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).
- Net Profit Margin
- The net profit margin exhibits a declining trend from 2017 to 2020, falling sharply from 21.88% in 2017 to only 6.45% in 2020. There is a slight recovery in 2021 to 8.22%, although it remains significantly below the levels seen in 2017 and 2018. This pattern indicates challenges in maintaining profitability over the period despite the partial rebound.
- Asset Turnover
- This ratio decreases markedly from 0.55 in 2017 to 0.13 in 2019, suggesting a substantial decline in the company's efficiency in generating sales from its assets. A modest improvement is observed in 2020 and 2021, rising to 0.2 and 0.21 respectively, but overall asset utilization remains weakened compared to the initial years.
- Financial Leverage
- Financial leverage demonstrates significant fluctuation. It increases from 3.77 in 2017 to a peak of 4.91 in 2018, followed by a sharp reduction to approximately 2.31-2.46 in the subsequent years. This trend implies a decrease in dependency on debt or other leveraged capital sources from 2019 onwards, potentially reflecting a strategic shift towards lower financial risk or reduced borrowing.
- Return on Equity (ROE)
- ROE follows a downward trajectory akin to profitability measures, peaking at 51.77% in 2018 before plunging drastically to 2.71% in 2019. Slight increases occur in 2020 and 2021, reaching 4.31%, yet ROE remains substantially lower than the elevated figures seen in the early years. This suggests diminished effectiveness in generating returns for shareholders during the latter period.
Five-Component Disaggregation of ROE
Fiserv Inc., decomposition of ROE
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).
- Tax Burden
- The tax burden ratio shows a declining trend over the period analyzed, starting at 0.89 in 2017, decreasing to 0.76 in 2018, recovering slightly in 2019 and 2020 to 0.82 and 0.83 respectively, and then declining again to 0.79 in 2021. This pattern suggests fluctuations in the effective tax rate, with a general decrease from the initial level.
- Interest Burden
- The interest burden ratio remains stable in the first two years at 0.89 but experiences a notable decline to 0.68 in 2019, hitting its lowest point at 0.62 in 2020 before recovering somewhat to 0.71 in 2021. This indicates an increased interest expense relative to earnings before interest and taxes during 2019 and 2020, followed by a partial reduction in interest costs or improved earnings in 2021.
- EBIT Margin
- EBIT margin experiences a significant reduction throughout the period. Starting from a high of 30.19% in 2018, it sharply declines to 15.69% in 2019 and continues to fall to 12.59% in 2020. A slight improvement is seen in 2021, with the margin rising to 14.75%. Overall, this decline reflects reduced operating profitability over time, with some recovery in the final year analyzed.
- Asset Turnover
- Asset turnover exhibits a marked decrease from 0.55 in 2017 to 0.52 in 2018, followed by a substantial drop to 0.13 in 2019. A minor recovery occurs in the subsequent years, reaching 0.20 in 2020 and 0.21 in 2021. This trend indicates a significant reduction in asset efficiency in generating sales during 2019, with slight improvement thereafter.
- Financial Leverage
- Financial leverage increases from 3.77 in 2017 to a peak of 4.91 in 2018, before declining sharply to 2.35 in 2019. It remains relatively stable afterward, slightly decreasing to 2.31 in 2020 and marginally rising to 2.46 in 2021. The initial increase in leverage suggests a rise in debt usage or equity reduction, followed by a substantial deleveraging phase and subsequent stabilization.
- Return on Equity (ROE)
- ROE shows a dramatic decline over the period, moving from very high values of 45.62% in 2017 and 51.77% in 2018 down to 2.71% in 2019. The metric stays low through 2020 and 2021, with slight improvements to 2.96% and 4.31% respectively. The sharp reduction in ROE aligns with declines in profitability margins and asset turnover, reflecting diminished returns generated for shareholders despite fluctuations in leverage and tax burden.
Two-Component Disaggregation of ROA
Fiserv Inc., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × | |||
| Dec 31, 2019 | = | × | |||
| Dec 31, 2018 | = | × | |||
| Dec 31, 2017 | = | × |
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).
- Net Profit Margin
- The net profit margin exhibited a declining trend from 21.88% in 2017 to 6.45% in 2020, followed by a slight improvement to 8.22% in 2021. This indicates a significant reduction in profitability over the period, with some recovery occurring in the final year.
- Asset Turnover
- Asset turnover decreased consistently from 0.55 in 2017 to 0.13 in 2019, reflecting less efficient use of assets in generating sales. After 2019, there was a moderate increase, reaching 0.21 by 2021, although it remained substantially below the initial level.
- Return on Assets (ROA)
- Return on assets followed a downward trajectory from 12.11% in 2017 to a low of 1.15% in 2019, indicating diminished ability to generate profit from asset investments. A slight upward trend was noted thereafter, with ROA increasing to 1.75% in 2021, yet still far below the earlier years' performance.
Four-Component Disaggregation of ROA
Fiserv Inc., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | × | |||||
| Dec 31, 2020 | = | × | × | × | |||||
| Dec 31, 2019 | = | × | × | × | |||||
| Dec 31, 2018 | = | × | × | × | |||||
| Dec 31, 2017 | = | × | × | × |
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).
- Tax Burden
- The tax burden ratio shows a decline from 0.89 in 2017 to 0.79 in 2021, with some fluctuations in the intervening years. The lowest point is observed in 2018, at 0.76, followed by a slight recovery and stabilization around 0.79 by 2021, indicating a moderate decrease in the proportion of income paid as tax over the period.
- Interest Burden
- The interest burden ratio remains stable at 0.89 during 2017 and 2018, but experiences a significant reduction to 0.68 in 2019 and further declines to 0.62 in 2020. A partial recovery occurs in 2021 with the ratio increasing to 0.71. This trend suggests higher interest expenses relative to earnings before interest and taxes in the middle years, with some easing in the latest year.
- EBIT Margin
- The EBIT margin shows a downward trend from 27.74% in 2017, peaking marginally at 30.19% in 2018, before sharply dropping to 15.69% in 2019, and declining further to 12.59% in 2020. A modest improvement to 14.75% occurs in 2021. This pattern reflects a substantial reduction in operational profitability starting in 2019, with a slight recovery observed in the last year.
- Asset Turnover
- The asset turnover ratio remains relatively stable at around 0.55 and 0.52 in 2017 and 2018, then exhibits a steep decline to 0.13 in 2019. It gradually increases slightly to 0.20 in 2020 and 0.21 in 2021. This indicates a significant decrease in the efficiency of asset utilization from 2019 onward, with only minor improvement subsequently.
- Return on Assets (ROA)
- Return on assets declines sharply from 12.11% in 2017 to 1.15% in 2019, remaining low but displaying a slow recovery to 1.28% in 2020 and 1.75% in 2021. This downward transition mirrors the declines seen in EBIT margin and asset turnover, highlighting a considerable deterioration in the company's ability to generate returns from its assets post-2018, with limited progress in recapturing past performance.
Disaggregation of Net Profit Margin
Fiserv Inc., decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × | ||||
| Dec 31, 2017 | = | × | × |
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).
- Tax Burden Ratio
- The tax burden ratio displayed some fluctuations over the observed years. It declined from 0.89 in 2017 to a low of 0.76 in 2018, indicating a higher tax expense relative to earnings before tax during that period. Subsequently, it increased to 0.82 in 2019 and stabilized around 0.83 in 2020, before slightly decreasing again to 0.79 in 2021. This suggests variability in the tax impact on the company's profitability, with periods of both increasing and decreasing effective tax rates.
- Interest Burden Ratio
- The interest burden ratio remained stable at 0.89 for 2017 and 2018, indicating consistent interest expenses relative to earnings before interest and taxes (EBIT). A significant decline occurred in 2019 and 2020, dropping to 0.68 and then further to 0.62, which reflects an increase in interest expenses or reduced EBIT in these years. In 2021, there was a moderate recovery to 0.71, though it remained below the earlier levels. This trend points to an increased interest burden impacting the company's profitability especially in the later years of the period.
- EBIT Margin
- The EBIT margin showed a peak at 30.19% in 2018, after an initial figure of 27.74% in 2017, indicating strong operational profitability at that time. However, it experienced a sharp decline to 15.69% in 2019, followed by further decreases to 12.59% in 2020. A slight improvement to 14.75% occurred in 2021 but remained substantially lower than the earlier years. This suggests a notable reduction in operating profit relative to revenue during most of the period, with some recovery in the final year, possibly reflecting operational challenges or increased costs.
- Net Profit Margin
- The net profit margin mirrored the overall downward trajectory observed in EBIT margin. Starting at 21.88% in 2017, it decreased to 20.38% in 2018 and then sharply declined in 2019 to 8.77%. The margin further dropped to 6.45% in 2020, the lowest point in the period analyzed. In 2021, a modest increase to 8.22% was noted, indicating a partial recovery in net profitability but still markedly below earlier levels. This decline highlights a reduction in the company's ability to convert revenue into net profit, potentially influenced by rising interest expenses, tax variations, or operational inefficiencies.