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
Fiserv 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).
An analysis of the profitability metrics from 2017 to 2021 reveals a significant divergence between gross profitability and bottom-line performance. While the ability to maintain core product margins remained strong, there was a sharp decline in operational efficiency and returns on capital starting in 2019.
- Gross Profit Margin
- The gross profit margin exhibited consistent growth and stability over the five-year period, rising from 46.91% in 2017 to 49.91% in 2021. This upward trend indicates a sustained ability to manage direct costs of sales effectively.
- Operating and Net Profit Margins
- Both operating and net profit margins peaked in 2018 at 30.10% and 20.38%, respectively. However, a substantial contraction occurred in 2019, with the operating margin falling to 15.79% and the net margin dropping to 8.77%. Despite a slight recovery in 2021, these margins remained significantly lower than 2017-2018 levels, suggesting a permanent increase in operating expenses or non-operating costs during this period.
- Return on Equity (ROE)
- A precipitous decline in ROE is observed between 2018 and 2019, falling from a peak of 51.77% to 2.71%. While the ratio showed marginal improvement through 2021, reaching 4.31%, it represents a drastic reduction in the efficiency of generating profits from shareholders' equity compared to the initial years of the analysis.
- Return on Assets (ROA)
- ROA followed a trajectory similar to ROE, decreasing from 12.11% in 2017 to a low of 1.15% in 2019. The gradual increase to 1.75% by 2021 indicates a persistent struggle to derive significant earnings from the total asset base following the 2019 downturn.
The data suggests that the erosion of net profitability and capital returns was not driven by a failure in core pricing or production costs, as gross margins remained robust. Instead, the sharp declines in 2019 across operating margins, ROE, and ROA point toward significant structural changes, increased leverage, or substantial one-time charges that heavily impacted the company's overall profitability profile.
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Gross Profit Margin
Fiserv 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 millions) | ||||||
| Gross profit | 8,098) | 7,040) | 4,878) | 2,754) | 2,672) | |
| Revenue | 16,226) | 14,852) | 10,187) | 5,823) | 5,696) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 49.91% | 47.40% | 47.88% | 47.30% | 46.91% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Accenture PLC | 32.38% | — | — | — | — | |
| Adobe Inc. | 88.18% | 86.62% | — | — | — | |
| AppLovin Corp. | 64.62% | — | — | — | — | |
| Cadence Design Systems Inc. | 89.73% | — | — | — | — | |
| Datadog Inc. | 77.23% | — | — | — | — | |
| International Business Machines Corp. | 54.90% | — | — | — | — | |
| Intuit Inc. | 82.53% | — | — | — | — | |
| Microsoft Corp. | 68.93% | — | — | — | — | |
| Oracle Corp. | 80.59% | — | — | — | — | |
| Palantir Technologies Inc. | 77.99% | — | — | — | — | |
| Palo Alto Networks Inc. | 70.05% | — | — | — | — | |
| Salesforce Inc. | 74.41% | — | — | — | — | |
| ServiceNow Inc. | 77.05% | — | — | — | — | |
| Synopsys Inc. | 79.50% | 78.44% | — | — | — | |
| Workday Inc. | 72.25% | — | — | — | — | |
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 × 8,098 ÷ 16,226 = 49.91%
2 Click competitor name to see calculations.
Between 2017 and 2021, a significant expansion in both revenue and gross profit was observed. Revenue grew from 5,696 million US dollars in 2017 to 16,226 million US dollars by 2021. Parallel to this, gross profit increased from 2,672 million US dollars to 8,098 million US dollars over the same period. The most substantial growth occurred between 2018 and 2020, where revenue and gross profit more than doubled.
- Gross Profit Margin Stability
- The gross profit margin demonstrated consistent stability with a general upward trend. The margin began at 46.91% in 2017 and rose to 47.88% by 2019. Despite a slight contraction to 47.40% in 2020, the margin recovered and reached a five-year peak of 49.91% in 2021.
- Efficiency and Scaling
- The maintenance and eventual improvement of the gross profit margin amidst rapid revenue growth indicates strong operational scalability. The increase in the margin to nearly 50% by the end of the period suggests that the company successfully managed its cost of sales relative to its revenue expansion, reflecting enhanced cost efficiencies or a favorable shift in the product and service mix.
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Operating Profit Margin
Fiserv 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 millions) | ||||||
| Operating income | 2,288) | 1,852) | 1,609) | 1,753) | 1,532) | |
| Revenue | 16,226) | 14,852) | 10,187) | 5,823) | 5,696) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 14.10% | 12.47% | 15.79% | 30.10% | 26.90% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Accenture PLC | 15.08% | — | — | — | — | |
| Adobe Inc. | 36.76% | 32.93% | — | — | — | |
| AppLovin Corp. | 5.37% | — | — | — | — | |
| Cadence Design Systems Inc. | 26.07% | — | — | — | — | |
| Datadog Inc. | -1.86% | — | — | — | — | |
| International Business Machines Corp. | 11.97% | — | — | — | — | |
| Intuit Inc. | 25.95% | — | — | — | — | |
| Microsoft Corp. | 41.59% | — | — | — | — | |
| Oracle Corp. | 37.58% | — | — | — | — | |
| Palantir Technologies Inc. | -26.66% | — | — | — | — | |
| Palo Alto Networks Inc. | -7.15% | — | — | — | — | |
| Salesforce Inc. | 2.14% | — | — | — | — | |
| ServiceNow Inc. | 4.36% | — | — | — | — | |
| Synopsys Inc. | 17.48% | 16.83% | — | — | — | |
| Workday Inc. | -5.76% | — | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Software & Services | 28.02% | — | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Information Technology | 26.58% | — | — | — | — | |
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 × Operating income ÷ Revenue
= 100 × 2,288 ÷ 16,226 = 14.10%
2 Click competitor name to see calculations.
The operational performance from 2017 to 2021 is characterized by a significant divergence between rapid revenue growth and operating margin efficiency.
- Revenue Growth Patterns
- A substantial increase in revenue is observed, growing from 5,696 million US$ in 2017 to 16,226 million US$ by 2021. The most aggressive expansion occurred between 2018 and 2020, during which period revenue more than doubled.
- Operating Income Trends
- Operating income exhibited a general upward trajectory, increasing from 1,532 million US$ in 2017 to 2,288 million US$ in 2021. However, this growth was not linear, as a contraction to 1,609 million US$ occurred in 2019 despite the simultaneous surge in revenue.
- Operating Profit Margin Volatility
- The operating profit margin experienced a sharp contraction. After reaching a peak of 30.10% in 2018, the margin declined precipitously to 15.79% in 2019 and further to a low of 12.47% in 2020. A marginal recovery to 14.10% was recorded in 2021.
The data indicates that the rapid scaling of the top line since 2019 has been accompanied by a disproportionate increase in operating expenses. This has resulted in a structural shift in profitability, with the operating profit margin remaining significantly lower than the levels maintained during the 2017-2018 period, suggesting increased cost intensity associated with the expanded scale of operations.
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Net Profit Margin
Fiserv 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 millions) | ||||||
| Net income attributable to Fiserv, Inc. | 1,334) | 958) | 893) | 1,187) | 1,246) | |
| Revenue | 16,226) | 14,852) | 10,187) | 5,823) | 5,696) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 8.22% | 6.45% | 8.77% | 20.38% | 21.88% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Accenture PLC | 11.69% | — | — | — | — | |
| Adobe Inc. | 30.55% | 40.88% | — | — | — | |
| AppLovin Corp. | 1.27% | — | — | — | — | |
| Cadence Design Systems Inc. | 23.29% | — | — | — | — | |
| Datadog Inc. | -2.02% | — | — | — | — | |
| International Business Machines Corp. | 10.01% | — | — | — | — | |
| Intuit Inc. | 21.41% | — | — | — | — | |
| Microsoft Corp. | 36.45% | — | — | — | — | |
| Oracle Corp. | 33.96% | — | — | — | — | |
| Palantir Technologies Inc. | -33.75% | — | — | — | — | |
| Palo Alto Networks Inc. | -11.72% | — | — | — | — | |
| Salesforce Inc. | 19.16% | — | — | — | — | |
| ServiceNow Inc. | 3.90% | — | — | — | — | |
| Synopsys Inc. | 18.02% | 18.03% | — | — | — | |
| Workday Inc. | -6.54% | — | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Software & Services | 25.12% | — | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Information Technology | 23.48% | — | — | — | — | |
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 attributable to Fiserv, Inc. ÷ Revenue
= 100 × 1,334 ÷ 16,226 = 8.22%
2 Click competitor name to see calculations.
A significant divergence is observed between revenue growth and net profit margins over the five-year period ending December 31, 2021. While total revenue experienced exponential growth, the net profit margin underwent a substantial contraction, indicating that earnings did not scale proportionally with the increase in top-line sales.
- Revenue Trajectory
- Revenue demonstrated a strong upward trend, increasing from 5,696 million US dollars in 2017 to 16,226 million US dollars by 2021. The most pronounced acceleration occurred between 2018 and 2019, where revenue nearly doubled, followed by continued expansion through 2020 and 2021.
- Net Income Performance
- Net income remained relatively volatile compared to revenue. After a slight decline from 1,246 million US dollars in 2017 to 893 million US dollars in 2019, a recovery phase began, culminating in a five-year peak of 1,334 million US dollars in 2021.
- Net Profit Margin Compression
- The net profit margin shifted from a high of 21.88% in 2017 to a low of 6.45% in 2020. This represents a sharp decline in profitability relative to revenue, particularly during the 2019-2020 period. Although a slight recovery to 8.22% was recorded in 2021, the margin remained significantly below the levels seen in 2017 and 2018.
The data suggests that the rapid expansion in revenue was accompanied by a disproportionate increase in expenses or a shift toward lower-margin revenue streams, resulting in a compressed profitability profile despite the increase in absolute net income by the end of the period.
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Return on Equity (ROE)
Fiserv 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 millions) | ||||||
| Net income attributable to Fiserv, Inc. | 1,334) | 958) | 893) | 1,187) | 1,246) | |
| Total Fiserv, Inc. shareholders’ equity | 30,952) | 32,330) | 32,979) | 2,293) | 2,731) | |
| Profitability Ratio | ||||||
| ROE1 | 4.31% | 2.96% | 2.71% | 51.77% | 45.62% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Accenture PLC | 30.25% | — | — | — | — | |
| Adobe Inc. | 32.59% | 39.66% | — | — | — | |
| AppLovin Corp. | 1.66% | — | — | — | — | |
| Cadence Design Systems Inc. | 25.39% | — | — | — | — | |
| Datadog Inc. | -1.99% | — | — | — | — | |
| International Business Machines Corp. | 30.38% | — | — | — | — | |
| Intuit Inc. | 20.89% | — | — | — | — | |
| Microsoft Corp. | 43.15% | — | — | — | — | |
| Oracle Corp. | 262.43% | — | — | — | — | |
| Palantir Technologies Inc. | -22.71% | — | — | — | — | |
| Palo Alto Networks Inc. | -78.63% | — | — | — | — | |
| Salesforce Inc. | 9.81% | — | — | — | — | |
| ServiceNow Inc. | 6.22% | — | — | — | — | |
| Synopsys Inc. | 14.31% | 13.54% | — | — | — | |
| Workday Inc. | -8.62% | — | — | — | — | |
| ROE, Sector | ||||||
| Software & Services | 35.91% | — | — | — | — | |
| ROE, Industry | ||||||
| Information Technology | 41.64% | — | — | — | — | |
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 attributable to Fiserv, Inc. ÷ Total Fiserv, Inc. shareholders’ equity
= 100 × 1,334 ÷ 30,952 = 4.31%
2 Click competitor name to see calculations.
A significant structural shift in the return on equity (ROE) is observed between the 2018 and 2019 fiscal years. While the company maintained exceptionally high ROE levels in the early period, a substantial increase in the equity base led to a sharp compression of this ratio, followed by a period of gradual recovery through 2021.
- Return on Equity (ROE) Volatility
- ROE exhibited strong growth between 2017 and 2018, rising from 45.62% to 51.77%. This was followed by a precipitous decline in 2019, where the ratio fell to 2.71%. From 2019 to 2021, a modest upward trend is observed, with ROE increasing to 2.96% in 2020 and 4.31% in 2021.
- Shareholders' Equity Dynamics
- The primary driver for the collapse in ROE was a drastic expansion of total shareholders' equity. Equity grew from 2.293 billion US dollars in 2018 to 32.979 billion US dollars in 2019, representing a massive increase in the capital base. Following this spike, equity levels remained high but showed a slight downward trend, ending at 30.952 billion US dollars in 2021.
- Net Income Trends
- Net income remained relatively consistent in 2017 and 2018, before experiencing a decline to 893 million US dollars in 2019. A recovery phase followed, with net income rising to 958 million US dollars in 2020 and reaching a period high of 1.334 billion US dollars in 2021. The growth in net income post-2019 has been the main contributor to the marginal improvement in ROE during the final three years of the period.
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Return on Assets (ROA)
Fiserv 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 millions) | ||||||
| Net income attributable to Fiserv, Inc. | 1,334) | 958) | 893) | 1,187) | 1,246) | |
| Total assets | 76,249) | 74,619) | 77,539) | 11,262) | 10,289) | |
| Profitability Ratio | ||||||
| ROA1 | 1.75% | 1.28% | 1.15% | 10.54% | 12.11% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Accenture PLC | 13.68% | — | — | — | — | |
| Adobe Inc. | 17.70% | 21.66% | — | — | — | |
| AppLovin Corp. | 0.58% | — | — | — | — | |
| Cadence Design Systems Inc. | 15.87% | — | — | — | — | |
| Datadog Inc. | -0.87% | — | — | — | — | |
| International Business Machines Corp. | 4.35% | — | — | — | — | |
| Intuit Inc. | 13.29% | — | — | — | — | |
| Microsoft Corp. | 18.36% | — | — | — | — | |
| Oracle Corp. | 10.48% | — | — | — | — | |
| Palantir Technologies Inc. | -16.02% | — | — | — | — | |
| Palo Alto Networks Inc. | -4.87% | — | — | — | — | |
| Salesforce Inc. | 6.14% | — | — | — | — | |
| ServiceNow Inc. | 2.13% | — | — | — | — | |
| Synopsys Inc. | 8.66% | 8.27% | — | — | — | |
| Workday Inc. | -3.24% | — | — | — | — | |
| ROA, Sector | ||||||
| Software & Services | 12.19% | — | — | — | — | |
| ROA, Industry | ||||||
| Information Technology | 14.52% | — | — | — | — | |
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 attributable to Fiserv, Inc. ÷ Total assets
= 100 × 1,334 ÷ 76,249 = 1.75%
2 Click competitor name to see calculations.
The financial data indicates a period of significant structural change in the asset base, resulting in a substantial decline in the Return on Assets (ROA) between 2017 and 2021. While the initial years showed high efficiency, a sharp increase in total assets in 2019 led to a sustained lower ROA, followed by a modest recovery trend observed in the final two years of the period.
- Asset Base Expansion
- Total assets experienced a dramatic increase from 11,262 million US$ in 2018 to 77,539 million US$ in 2019. This represents a nearly sevenfold increase in the asset base within a single year. This expanded scale remained relatively stable through 2021, concluding the period at 76,249 million US$.
- Net Income Performance
- Net income attributable to the company exhibited moderate volatility. After declining from 1,246 million US$ in 2017 to a period low of 893 million US$ in 2019, a recovery trend emerged. Net income rose to 1,334 million US$ by December 31, 2021, representing the highest net income level within the analyzed five-year window.
- ROA Trajectory and Efficiency
- A precipitous drop in ROA is observed between 2018 and 2019, falling from 10.54% to 1.15%. This contraction is primarily attributable to the massive expansion of the asset denominator relative to net income. Since 2019, a gradual upward trend has developed, with ROA improving to 1.28% in 2020 and 1.75% in 2021, indicating a incremental increase in the efficiency of the expanded asset base in generating profit.
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