DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Quarterly Data
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2012
- Net Profit Margin since 2012
- Debt to Equity since 2012
- Price to Operating Profit (P/OP) since 2012
- Price to Book Value (P/BV) since 2012
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Two-Component Disaggregation of ROE
Kraft Foods Group Inc., decomposition of ROE (quarterly data)
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Mar 28, 2015 | = | × | |||
| Dec 27, 2014 | = | × | |||
| Sep 27, 2014 | = | × | |||
| Jun 28, 2014 | = | × | |||
| Mar 29, 2014 | = | × | |||
| Dec 28, 2013 | = | × | |||
| Sep 28, 2013 | = | × | |||
| Jun 29, 2013 | = | × | |||
| Mar 30, 2013 | = | × |
Based on: 10-Q (reporting date: 2015-03-28), 10-K (reporting date: 2014-12-27), 10-Q (reporting date: 2014-09-27), 10-Q (reporting date: 2014-06-28), 10-Q (reporting date: 2014-03-29), 10-K (reporting date: 2013-12-28), 10-Q (reporting date: 2013-09-28), 10-Q (reporting date: 2013-06-29), 10-Q (reporting date: 2013-03-30).
The financial performance over the observed periods demonstrates notable fluctuations in key profitability and leverage metrics.
- Return on Assets (ROA)
- ROA showed an upward trend from 6.94% in early 2013 to a peak of 11.87% by the first quarter of 2014. This indicates improving efficiency in asset utilization during this timeframe. However, from mid-2014 onwards, ROA gradually declined, dropping sharply to 4.15% by the first quarter of 2015, suggesting a reduction in asset profitability in the most recent periods.
- Financial Leverage
- The financial leverage ratio steadily decreased from 6.22 in the first quarter of 2013 to about 4.08 by the third quarter of 2014. This reduction implies a diminishing reliance on debt financing over this period. In the latter part of the timeline, leverage increased again, reaching approximately 5.26 in the fourth quarter of 2014 and slightly declining to 5.12 by the first quarter of 2015, indicating a partial reversal of the earlier deleveraging trend.
- Return on Equity (ROE)
- ROE remained relatively high and stable between 38.64% and 52.34% throughout 2013 to early 2014, peaking at 52.34% in the last quarter of 2013. This reflects strong returns to shareholders during this period, likely supported by the efficient use of financial leverage. However, a marked decline in ROE occurred starting from late 2014, falling to 21.23% in the first quarter of 2015, paralleling the decline in ROA and suggesting that diminished asset profitability and increased leverage adversely affected equity returns.
Overall, the data reveal an initial phase of improving profitability and controlled leverage, followed by a period of decreased asset returns and increased financial leverage, culminating in significantly lower returns on equity by early 2015. This pattern may signal emerging operational challenges or changes in financial strategy impacting overall company performance.
Three-Component Disaggregation of ROE
Kraft Foods Group Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2015-03-28), 10-K (reporting date: 2014-12-27), 10-Q (reporting date: 2014-09-27), 10-Q (reporting date: 2014-06-28), 10-Q (reporting date: 2014-03-29), 10-K (reporting date: 2013-12-28), 10-Q (reporting date: 2013-09-28), 10-Q (reporting date: 2013-06-29), 10-Q (reporting date: 2013-03-30).
- Net Profit Margin
- The net profit margin exhibited a general upward trend from early 2013 through the first quarter of 2014, increasing from 8.78% to a peak of 15.34%. Following this peak, the margin declined steadily, falling to 5.27% by the first quarter of 2015. This suggests that profitability relative to sales improved significantly in the initial periods but faced considerable pressure and contraction thereafter.
- Asset Turnover
- The asset turnover ratio remained relatively stable throughout the periods, fluctuating narrowly between 0.77 and 0.79. This stability indicates consistent efficiency in using assets to generate revenue, with no significant changes in operational asset utilization over the examined quarters.
- Financial Leverage
- Financial leverage showed a decreasing trend from a high of 6.22 in the first quarter of 2013 to a low of 4.08 by the third quarter of 2014, indicating a reduction in the use of debt or other liabilities relative to equity. However, this ratio increased again toward the end of 2014 and beginning of 2015, reaching above 5.10, implying a renewed increase in leverage during that time.
- Return on Equity (ROE)
- ROE followed a pattern similar to net profit margin, beginning at 43.16% in early 2013 and peaking at 52.34% by the end of 2013. This was followed by a sharp decline to 21.23% by the first quarter of 2015. Such a trend reflects fluctuations in the company’s profitability and financial efficiency, with a significant downturn in shareholder returns in the latter periods.
- Overall Insights
- The data indicates that the company experienced strong profitability and returns on equity through 2013 and early 2014, supported by high net profit margins and moderate financial leverage. The asset turnover remained stable, suggesting consistent operational efficiency. However, the latter part of 2014 and early 2015 saw a marked decline in both profitability and shareholder returns, coupled with an increase in financial leverage. This combination may point to challenges in maintaining profit levels, potentially influenced by higher financial risk or operational pressures.
Five-Component Disaggregation of ROE
Kraft Foods Group Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2015-03-28), 10-K (reporting date: 2014-12-27), 10-Q (reporting date: 2014-09-27), 10-Q (reporting date: 2014-06-28), 10-Q (reporting date: 2014-03-29), 10-K (reporting date: 2013-12-28), 10-Q (reporting date: 2013-09-28), 10-Q (reporting date: 2013-06-29), 10-Q (reporting date: 2013-03-30).
- Tax Burden
- The tax burden ratio remained relatively stable around 0.66 to 0.68 from the first quarter of 2013 through the third quarter of 2014. However, a notable increase occurred in the last two quarters of 2014 and into the first quarter of 2015, rising to 0.74 and 0.77 respectively. This suggests a growing proportion of pre-tax income being absorbed by taxes during this period.
- Interest Burden
- The interest burden ratio was fairly consistent between 0.85 and 0.89 from March 2013 through September 2014, indicating steady interest expense relative to earnings before interest and taxes. A significant decline occurred in the last quarter of 2014 and the first quarter of 2015, dropping to 0.74 and 0.72, which may reflect reduced interest expense or improved operating income coverage of interest obligations.
- EBIT Margin
- EBIT margin showed a strong upward trend early in the period, improving from 15.04% in March 2013 to a peak of 25.94% in March 2014. Following this peak, margins declined steadily, dropping sharply in the last two quarters of 2014 down to 10.38% and further to 9.49% in the first quarter of 2015. This reversal suggests a deterioration in operational profitability after a period of improvement.
- Asset Turnover
- Asset turnover remained remarkably stable throughout the entire period, fluctuating only marginally around 0.78 to 0.79. This consistency indicates stable efficiency in using assets to generate sales.
- Financial Leverage
- Financial leverage exhibited a downward trend from 6.22 in the first quarter of 2013, declining steadily to 4.08 by the third quarter of 2014. However, the last two quarters of 2014 showed an increase to 5.26 and 5.12 respectively, indicating a rise in leverage towards the end of the period.
- Return on Equity (ROE)
- ROE showed fluctuations with an initial decline from 43.16% in March 2013 to 38.64% in the third quarter of 2013, followed by a significant rise to a peak of 52.34% in the fourth quarter of 2013. The ratio remained relatively high through mid-2014 but dropped sharply in the last quarter of 2014 to 23.89%, continuing to decline to 21.23% in the first quarter of 2015. This downward trend in ROE aligns with the reduction in EBIT margin and increased tax burden observed in the latter part of the period.
Two-Component Disaggregation of ROA
Kraft Foods Group Inc., decomposition of ROA (quarterly data)
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Mar 28, 2015 | = | × | |||
| Dec 27, 2014 | = | × | |||
| Sep 27, 2014 | = | × | |||
| Jun 28, 2014 | = | × | |||
| Mar 29, 2014 | = | × | |||
| Dec 28, 2013 | = | × | |||
| Sep 28, 2013 | = | × | |||
| Jun 29, 2013 | = | × | |||
| Mar 30, 2013 | = | × |
Based on: 10-Q (reporting date: 2015-03-28), 10-K (reporting date: 2014-12-27), 10-Q (reporting date: 2014-09-27), 10-Q (reporting date: 2014-06-28), 10-Q (reporting date: 2014-03-29), 10-K (reporting date: 2013-12-28), 10-Q (reporting date: 2013-09-28), 10-Q (reporting date: 2013-06-29), 10-Q (reporting date: 2013-03-30).
- Net Profit Margin
- The net profit margin exhibited an increasing trend from 8.78% in March 2013 to a peak of 15.34% by March 2014, indicating improved profitability within this period. After reaching this peak, the margin experienced a decline, dropping notably to 5.27% by March 2015. This downward shift suggests a reduction in profit efficiency or increased costs affecting overall profitability in the later periods.
- Asset Turnover
- The asset turnover ratio remained relatively stable throughout the observed periods, fluctuating narrowly between 0.77 and 0.79. This indicates a consistent level of efficiency in using assets to generate revenue, with no significant improvements or deteriorations in asset utilization over time.
- Return on Assets (ROA)
- ROA followed a pattern similar to net profit margin, starting at 6.94% in March 2013 and rising steadily to 11.87% by March 2014. This improvement signals enhanced capability in generating returns from the company's assets. However, post-March 2014, ROA declined sharply, reaching 4.15% in March 2015, reflecting a decreased effectiveness in asset usage for profit generation in the later quarters.
Four-Component Disaggregation of ROA
Kraft Foods Group Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2015-03-28), 10-K (reporting date: 2014-12-27), 10-Q (reporting date: 2014-09-27), 10-Q (reporting date: 2014-06-28), 10-Q (reporting date: 2014-03-29), 10-K (reporting date: 2013-12-28), 10-Q (reporting date: 2013-09-28), 10-Q (reporting date: 2013-06-29), 10-Q (reporting date: 2013-03-30).
- Tax Burden
- The tax burden ratio exhibits a relatively stable trend from March 2013 to September 2014, fluctuating slightly between 0.66 and 0.68. However, from December 2014 onwards, there is a noticeable increase, reaching 0.77 by March 2015. This upward movement indicates a growing proportion of earnings being paid in taxes in the most recent quarters.
- Interest Burden
- The interest burden remains fairly consistent around 0.85 to 0.89 through most of 2013 and mid-2014, suggesting relatively stable interest expenses relative to earnings before interest and taxes. Yet, a marked decrease occurs in the last two quarters of 2014 and into early 2015, dropping to 0.72 by March 2015, which implies a reduced impact of interest expense on earnings during this period.
- EBIT Margin
- Earnings before interest and taxes margin shows a significant increase from Q1 2013 through Q1 2014, peaking at 25.94%. Following this peak, the margin declines steadily, with the most dramatic drops occurring in the final two quarters of 2014 and the first quarter of 2015, falling to 9.49%. This suggests a sharp reduction in operating profitability over the recent periods.
- Asset Turnover
- Asset turnover remains notably stable across all periods, consistently around 0.78 to 0.79. This stability indicates that the efficiency with which the company utilizes its assets to generate sales has not materially changed during the timeframe under review.
- Return on Assets (ROA)
- Return on assets follows a pattern similar to the EBIT margin, with a steady increase from 6.94% in early 2013 to a peak of 11.87% in the first quarter of 2014. Thereafter, ROA declines significantly, reaching 4.15% in the latest quarter. This decline reflects a reduction in overall profitability and asset efficiency in generating net income during the most recent periods.
Disaggregation of Net Profit Margin
Kraft Foods Group Inc., decomposition of net profit margin ratio (quarterly data)
Based on: 10-Q (reporting date: 2015-03-28), 10-K (reporting date: 2014-12-27), 10-Q (reporting date: 2014-09-27), 10-Q (reporting date: 2014-06-28), 10-Q (reporting date: 2014-03-29), 10-K (reporting date: 2013-12-28), 10-Q (reporting date: 2013-09-28), 10-Q (reporting date: 2013-06-29), 10-Q (reporting date: 2013-03-30).
- Tax Burden
- The tax burden ratio remained relatively stable around 0.66 to 0.67 from the first quarter of 2013 through the third quarter of 2014. A notable increase occurred in the fourth quarter of 2014, rising to 0.74 and further increasing to 0.77 in the first quarter of 2015, indicating a higher proportion of pre-tax income paid as tax towards the end of the period analyzed.
- Interest Burden
- The interest burden ratio exhibited stability between 0.85 and 0.89 for most of the quarters from March 2013 through September 2014. However, a significant decline was observed starting in the fourth quarter of 2014, dropping sharply to 0.74 and further down to 0.72 in the first quarter of 2015. This suggests an increased interest expense relative to earnings before interest and taxes in the latter quarters.
- EBIT Margin
- The EBIT margin demonstrated an upward trend from 15.04% in the first quarter of 2013 to a peak of 25.94% in the first quarter of 2014. Following this peak, the margin experienced a decline, decreasing to 22.19% by the third quarter of 2014 and sharply falling to 10.38% in the fourth quarter of 2014 and 9.49% in the first quarter of 2015. The decline indicates reduced operational profitability towards the end of the reporting periods.
- Net Profit Margin
- The net profit margin increased consistently from 8.78% in the first quarter of 2013 to a high of 15.34% in the first quarter of 2014, reflecting improved overall profitability. After this peak, the net profit margin decreased gradually to 13.1% in the third quarter of 2014, followed by a substantial drop in the last quarter of 2014 to 5.73% and a further slight decline to 5.27% in the first quarter of 2015. This pattern aligns with the downward trend seen in EBIT margin and indicates lower net earnings relative to sales in the final quarters analyzed.