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
Illumina Inc., profitability ratios
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
The profitability profile between 2016 and 2020 is characterized by consistent gross margins and a general upward trajectory in operational efficiency until 2019, followed by a marked contraction across all key performance indicators in 2020.
- Gross Profit Margin
- A high degree of stability is observed, with values oscillating within a narrow range between 66.35% and 69.63%. This suggests a consistent ability to manage direct production costs relative to revenue over the five-year period.
- Operating Profit Margin
- The operating margin showed steady growth from 24.48% in 2016 to a peak of 27.80% in 2019. However, a significant decline occurred in 2020, where the margin fell to 17.91%, indicating a substantial increase in operating expenses relative to sales.
- Net Profit Margin
- Net profitability exhibited volatility, reaching its highest point of 28.28% in 2019. Similar to the operating margin, a sharp decrease was recorded in 2020, with the margin receding to 20.25%.
- Return on Equity (ROE) and Return on Assets (ROA)
- Both efficiency ratios peaked in 2017 and 2019 but experienced a notable downturn in 2020. ROE declined to 13.98% and ROA dropped to 8.65%, representing the lowest returns on invested capital and assets within the analyzed period.
Overall, while the organization maintained strong core profitability through 2019, the 2020 fiscal year reveals a comprehensive decline in operational efficiency and bottom-line returns, despite the relative resilience of the gross profit margin.
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Gross Profit Margin
Illumina Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 2,203) | 2,467) | 2,300) | 1,826) | 1,666) | |
| Revenue | 3,239) | 3,543) | 3,333) | 2,752) | 2,398) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 68.01% | 69.63% | 69.01% | 66.35% | 69.48% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 2020 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 2,203 ÷ 3,239 = 68.01%
2 Click competitor name to see calculations.
The company exhibited a period of growth in both top-line revenue and gross profit from 2016 through 2019, followed by a contraction in 2020. Profitability margins remained relatively stable throughout the five-year period, fluctuating within a narrow range between 66% and 70%.
- Revenue and Gross Profit Trajectory
- Revenue increased steadily from 2,398 million US$ in 2016 to a peak of 3,543 million US$ in 2019. Gross profit followed a similar trajectory, rising from 1,666 million US$ in 2016 to 2,467 million US$ in 2019, reflecting an expansion in the company's operational scale.
- Gross Profit Margin Volatility
- The gross profit margin demonstrated high stability with minor fluctuations. A dip to 66.35% was observed in 2017, which was subsequently reversed over the following two years, reaching a peak of 69.63% in 2019. This suggests an effective management of direct costs during the growth phase.
- Performance Shift in 2020
- A downward trend emerged in 2020, characterized by a decline in revenue to 3,239 million US$ and a decrease in gross profit to 2,203 million US$. This contraction resulted in a margin compression to 68.01%, indicating a reduction in overall profitability compared to the previous year's peak.
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Operating Profit Margin
Illumina Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Income from operations | 580) | 985) | 883) | 606) | 587) | |
| Revenue | 3,239) | 3,543) | 3,333) | 2,752) | 2,398) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 17.91% | 27.80% | 26.49% | 22.02% | 24.48% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 2020 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenue
= 100 × 580 ÷ 3,239 = 17.91%
2 Click competitor name to see calculations.
The financial performance from 2016 to 2020 is characterized by a period of steady growth in scale and operational efficiency through 2019, followed by a significant contraction in the final year. While revenue and operating income generally trended upward for the first four years, the operating profit margin exhibited volatility before a sharp decline in 2020.
- Revenue and Operating Income Growth (2016–2019)
- A consistent upward trajectory was observed from 2016 to 2019, with revenue increasing from US$ 2,398 million to US$ 3,543 million. During this same period, income from operations grew from US$ 587 million to a peak of US$ 985 million, demonstrating an ability to scale operational earnings in tandem with top-line growth.
- Operating Profit Margin Dynamics
- The operating profit margin experienced a slight compression in 2017, falling from 24.48% to 22.02%. However, this was followed by a period of expansion, with the margin reaching 26.49% in 2018 and peaking at 27.80% in 2019. This expansion suggests improved operational leverage and cost management relative to revenue during those years.
- Operational Contraction in 2020
- A notable reversal occurred in 2020, as revenue declined to US$ 3,239 million. This decrease in revenue was accompanied by a more severe reduction in operating income, which dropped to US$ 580 million. As a result, the operating profit margin fell sharply to 17.91%, the lowest point in the five-year period, indicating a significant increase in operating costs or a decrease in pricing power relative to the previous year.
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Net Profit Margin
Illumina Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Illumina stockholders | 656) | 1,002) | 826) | 726) | 463) | |
| Revenue | 3,239) | 3,543) | 3,333) | 2,752) | 2,398) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 20.25% | 28.28% | 24.78% | 26.38% | 19.29% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 2020 Calculation
Net profit margin = 100 × Net income attributable to Illumina stockholders ÷ Revenue
= 100 × 656 ÷ 3,239 = 20.25%
2 Click competitor name to see calculations.
The financial performance from 2016 to 2020 is characterized by a period of sustained growth in both top-line revenue and bottom-line profitability, culminating in a peak in 2019, followed by a notable contraction in 2020.
- Revenue and Net Income Growth (2016-2019)
- A consistent upward trajectory was observed in revenue, which increased from US$ 2,398 million in 2016 to a peak of US$ 3,543 million in 2019. During this same interval, net income attributable to stockholders rose from US$ 463 million to US$ 1,002 million, indicating a strong ability to scale operations and increase absolute profitability.
- Net Profit Margin Volatility
- The net profit margin exhibited fluctuations during the growth phase. After a sharp increase from 19.29% in 2016 to 26.38% in 2017, a slight compression to 24.78% occurred in 2018. Efficiency peaked in 2019 with a net profit margin of 28.28%, representing the highest level of profitability relative to revenue in the five-year period.
- Performance Contraction in 2020
- A reversal of the previous growth trend is evident in 2020. Revenue decreased to US$ 3,239 million, while net income saw a significant reduction to US$ 656 million. This resulted in the net profit margin falling to 20.25%, nearly returning to the levels observed in 2016 and reflecting a substantial decline in operational efficiency compared to the 2019 peak.
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Return on Equity (ROE)
Illumina Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Illumina stockholders | 656) | 1,002) | 826) | 726) | 463) | |
| Total Illumina stockholders’ equity | 4,694) | 4,613) | 3,758) | 2,749) | 2,197) | |
| Profitability Ratio | ||||||
| ROE1 | 13.98% | 21.72% | 21.98% | 26.41% | 21.06% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 2020 Calculation
ROE = 100 × Net income attributable to Illumina stockholders ÷ Total Illumina stockholders’ equity
= 100 × 656 ÷ 4,694 = 13.98%
2 Click competitor name to see calculations.
The analysis of profitability reveals a period of growth followed by a notable decline in capital efficiency during the final year of the observed period.
- Net Income Performance
- Net income attributable to stockholders exhibited a strong upward trajectory from 2016 to 2019, increasing from US$ 463 million to a peak of US$ 1,002 million. This growth trend reversed in 2020, with net income decreasing to US$ 656 million, representing a significant contraction from the previous year's high.
- Stockholders' Equity Expansion
- Total stockholders' equity showed consistent and uninterrupted growth throughout the five-year period. The equity base expanded from US$ 2,197 million in 2016 to US$ 4,694 million by the end of 2020, indicating a steady accumulation of capital over time.
- Return on Equity (ROE) Trends
- The return on equity peaked at 26.41% in 2017, driven by net income growth that outpaced the increase in equity. Between 2018 and 2019, the ROE stabilized, remaining within a narrow range of 21.72% to 21.98%. A sharp decline is observed in 2020, with the ROE falling to 13.98%. This compression is a direct result of the decrease in net income occurring simultaneously with a continued increase in the total equity base, thereby reducing the overall return generated on stockholders' investments.
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Return on Assets (ROA)
Illumina Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2020 | Dec 29, 2019 | Dec 30, 2018 | Dec 31, 2017 | Dec 31, 2016 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Illumina stockholders | 656) | 1,002) | 826) | 726) | 463) | |
| Total assets | 7,585) | 7,316) | 6,959) | 5,257) | 4,281) | |
| Profitability Ratio | ||||||
| ROA1 | 8.65% | 13.70% | 11.87% | 13.81% | 10.81% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| AbbVie Inc. | — | — | — | — | — | |
| Amgen Inc. | — | — | — | — | — | |
| Bristol-Myers Squibb Co. | — | — | — | — | — | |
| Danaher Corp. | — | — | — | — | — | |
| Eli Lilly & Co. | — | — | — | — | — | |
| Gilead Sciences Inc. | — | — | — | — | — | |
| Johnson & Johnson | — | — | — | — | — | |
| Merck & Co. Inc. | — | — | — | — | — | |
| Pfizer Inc. | — | — | — | — | — | |
| Regeneron Pharmaceuticals Inc. | — | — | — | — | — | |
| Thermo Fisher Scientific Inc. | — | — | — | — | — | |
| Vertex Pharmaceuticals Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-29), 10-K (reporting date: 2018-12-30), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).
1 2020 Calculation
ROA = 100 × Net income attributable to Illumina stockholders ÷ Total assets
= 100 × 656 ÷ 7,585 = 8.65%
2 Click competitor name to see calculations.
Between 2016 and 2020, a consistent expansion of the asset base was observed, with total assets increasing from US$ 4,281 million to US$ 7,585 million. Net income attributable to stockholders followed a general upward trajectory for the majority of the period, peaking at US$ 1,002 million in 2019 before experiencing a contraction to US$ 656 million in 2020.
- Return on Assets (ROA) Volatility
- The ROA exhibited fluctuating performance, starting at 10.81% in 2016 and reaching a peak of 13.81% in 2017. Although a moderate decline to 11.87% occurred in 2018, the ratio recovered to 13.70% by 2019, indicating a period of relatively stable asset efficiency.
- Analysis of the 2020 Decline
- A sharp decline in ROA to 8.65% is observed in 2020, marking the lowest efficiency level within the five-year period. This downturn is attributed to a significant reduction in net income occurring simultaneously with a continued increase in total assets, which diluted the return generated per unit of asset.
- Asset Utilization and Profitability Correlation
- While total assets grew steadily each year, profitability did not maintain a proportional growth rate. The divergence in 2020 highlights a decrease in the effectiveness of asset deployment, as the company's expanded resource base failed to sustain previous levels of net income.
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