Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Operating Profit Margin since 2012
- Return on Equity (ROE) since 2012
- Total Asset Turnover since 2012
- Price to Book Value (P/BV) since 2012
- Analysis of Debt
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Profitability Ratios (Summary)
Kraft Foods Group Inc., profitability ratios
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Return on Sales | ||||
| Gross profit margin | ||||
| Operating profit margin | ||||
| Net profit margin | ||||
| Return on Investment | ||||
| Return on equity (ROE) | ||||
| Return on assets (ROA) | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
- Gross Profit Margin
- The gross profit margin increased significantly from 31.84% in 2012 to 37.45% in 2013, indicating enhanced efficiency or pricing power during this period. However, in 2014, it dropped sharply to 26.61%, reflecting a notable decline in gross profitability which may signal increased costs or pricing pressures.
- Operating Profit Margin
- The operating profit margin exhibited a similar pattern, rising from 14.56% in 2012 to a peak of 25.20% in 2013, suggesting improved operational performance or better cost management. Conversely, it decreased substantially to 10.38% in 2014, signaling a weakening in operating efficiency or increased operating expenses.
- Net Profit Margin
- The net profit margin increased from 8.95% in 2012 to 14.90% in 2013, demonstrating improved overall profitability. This was followed by a decline to 5.73% in 2014, indicating reduced profitability at the net level, likely affected by lower gross and operating margins.
- Return on Equity (ROE)
- The return on equity rose from 45.97% in 2012 to 52.34% in 2013, highlighting strong returns for shareholders during this period. The ROE then fell to 23.89% in 2014, representing a significant reduction in the company’s ability to generate profits from shareholders' investments.
- Return on Assets (ROA)
- Return on assets improved from 7.04% in 2012 to 11.73% in 2013, reflecting enhanced asset utilization and profitability. It later dropped to 4.55% in 2014, indicating a decline in efficiency in the use of assets to generate earnings.
Return on Sales
Return on Investment
Gross Profit Margin
Kraft Foods Group Inc., gross profit margin calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Gross profit | ||||
| Net revenues | ||||
| Profitability Ratio | ||||
| Gross profit margin1 | ||||
| Benchmarks | ||||
| Gross Profit Margin, Competitors2 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Gross profit margin = 100 × Gross profit ÷ Net revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Revenues
- The net revenues of the company remained relatively stable over the three-year period, with a slight decrease from approximately 18,339 million USD in 2012 to 18,205 million USD in 2014. The variations are minimal, indicating a largely consistent revenue stream during these years.
- Gross Profit
- The gross profit experienced significant fluctuations. It increased from 5,840 million USD in 2012 to 6,823 million USD in 2013, followed by a notable decline to 4,845 million USD in 2014. This pattern suggests variability in the company's cost management or changes in the cost of goods sold.
- Gross Profit Margin
- The gross profit margin mirrored the trends in gross profit but demonstrated more pronounced changes. It increased from 31.84% in 2012 to 37.45% in 2013, indicating improved efficiency or pricing power, before declining sharply to 26.61% in 2014. This decline points to a reduction in profitability at the gross level during the final year observed.
Operating Profit Margin
Kraft Foods Group Inc., operating profit margin calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Operating income | ||||
| Net revenues | ||||
| Profitability Ratio | ||||
| Operating profit margin1 | ||||
| Benchmarks | ||||
| Operating Profit Margin, Competitors2 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Operating profit margin = 100 × Operating income ÷ Net revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data over the three-year period reflects notable fluctuations in key performance metrics. Operating income exhibited a significant increase from 2012 to 2013, rising from 2,670 million US dollars to 4,591 million US dollars. However, this upward trend did not persist, as operating income decreased sharply to 1,890 million US dollars in 2014.
Net revenues remained relatively stable across the three years, with a slight downward trend observed. The revenues were 18,339 million US dollars in 2012, followed by a small decrease to 18,218 million US dollars in 2013, and further marginal decline to 18,205 million US dollars in 2014. This consistency suggests stable sales or revenue generation despite fluctuations in profitability.
The operating profit margin closely mirrors the behavior of operating income, starting at 14.56% in 2012, peaking markedly at 25.2% in 2013, and then falling to 10.38% in 2014. The margin's volatility indicates changes in operating efficiency or cost structures year over year. The sharp increase in 2013 suggests enhanced profitability during that period, while the significant reduction in 2014 points to diminished operational efficiency or higher costs relative to revenue.
- Overall Trends
- Operating profitability showed considerable volatility, peaking in 2013 then declining substantially in 2014, despite relatively stable revenue levels.
- Revenue Stability
- Net revenues were largely unchanged, indicating stable sales performance or revenue streams during the period under analysis.
- Profitability Implications
- The sharp rise and fall in both operating income and operating profit margin imply changes in cost management, pricing strategies, or other operational factors influencing net income independently of sales volume.
Net Profit Margin
Kraft Foods Group Inc., net profit margin calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Net earnings | ||||
| Net revenues | ||||
| Profitability Ratio | ||||
| Net profit margin1 | ||||
| Benchmarks | ||||
| Net Profit Margin, Competitors2 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
Net profit margin = 100 × Net earnings ÷ Net revenues
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net earnings
- The net earnings exhibited significant volatility over the analyzed periods. There was a marked increase from 1,642 million US dollars in 2012 to 2,715 million in 2013, followed by a sharp decline to 1,043 million in 2014. This pattern suggests that while the company achieved substantial earnings growth initially, it was unable to sustain this level, experiencing a notable reduction in profitability the following year.
- Net revenues
- Net revenues remained relatively stable across the three years, hovering around 18.2 billion US dollars. Specifically, revenues slightly decreased from 18,339 million in 2012 to 18,218 million in 2013 and remained nearly flat at 18,205 million in 2014. This indicates a period of stagnation in top-line growth, suggesting challenges in expanding sales or market share during the timeframe.
- Net profit margin
- The net profit margin showed notable fluctuations parallel to the net earnings trend. There was an improvement from 8.95% in 2012 to a high of 14.9% in 2013, reflecting increased profitability efficiency. However, this was followed by a steep decline to 5.73% in 2014, indicating diminished profitability relative to revenues. This decline implies possible cost pressures, decreased operational efficiency, or other factors adversely affecting margins despite stable revenue levels.
Return on Equity (ROE)
Kraft Foods Group Inc., ROE calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Net earnings | ||||
| Equity | ||||
| Profitability Ratio | ||||
| ROE1 | ||||
| Benchmarks | ||||
| ROE, Competitors2 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
ROE = 100 × Net earnings ÷ Equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data indicates significant fluctuations in the company's net earnings over the three-year period. Net earnings increased sharply from 1,642 million USD in 2012 to a peak of 2,715 million USD in 2013, followed by a considerable decline to 1,043 million USD in 2014. This suggests a period of strong profitability in 2013, which was not sustained into the subsequent year.
Equity also showed a notable upward trend from 3,572 million USD in 2012 to 5,187 million USD in 2013 before decreasing to 4,365 million USD in 2014. The increase in equity during 2013 may reflect retained earnings or capital injections, while the decline in 2014 could indicate losses, dividend distributions, or share repurchases that reduced the equity base.
The Return on Equity (ROE), measured as a percentage, mirrors the pattern observed in net earnings. The ROE increased from 45.97% in 2012 to a higher 52.34% in 2013, indicating enhanced efficiency in generating profits from shareholders' equity during that year. However, the ROE then dropped substantially to 23.89% in 2014, reflecting a decrease in profitability relative to equity employed.
- Overall trends and insights:
- The company experienced a peak performance year in 2013, marked by record net earnings and high ROE, supported by an expanded equity base. Despite this strong performance, 2014 showed a downturn in profitability and a reduction in equity, which lowered the efficiency of equity as measured by ROE. This volatility suggests the company faced challenges in sustaining its 2013 performance into 2014.
- The sharp decline in net earnings and ROE in 2014 might warrant further investigation into underlying operational issues, market conditions, or extraordinary items affecting financial results. The decrease in equity concurrently implies possible strategic decisions affecting the capital structure or the carrying value of assets.
Return on Assets (ROA)
Kraft Foods Group Inc., ROA calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Net earnings | ||||
| Total assets | ||||
| Profitability Ratio | ||||
| ROA1 | ||||
| Benchmarks | ||||
| ROA, Competitors2 | ||||
| lululemon athletica inc. | ||||
| Nike Inc. | ||||
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 2014 Calculation
ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals notable fluctuations over the three-year period. Net earnings experienced a significant increase from 1,642 million US dollars in 2012 to 2,715 million US dollars in 2013, followed by a sharp decline to 1,043 million US dollars in 2014. This indicates considerable volatility in profitability within the timeframe.
Total assets remained relatively stable across the years, with a slight downward trend from 23,329 million US dollars in 2012 to 22,947 million US dollars in 2014. The minimal change suggests consistent asset management without major acquisitions or disposals impacting the asset base.
The return on assets (ROA) mirrors the pattern observed in net earnings, increasing from 7.04% in 2012 to 11.73% in 2013, then dropping significantly to 4.55% in 2014. This trend highlights a peak in operational efficiency or profitability in 2013, followed by a considerable reduction in the following year.
- Net Earnings:
- Substantial growth in 2013, more than a 65% increase compared to 2012, then a decline of approximately 61.5% in 2014.
- Total Assets:
- Relatively steady, with less than 2% decrease over three years, indicating stable asset levels.
- Return on Assets (ROA):
- Strong improvement in 2013 followed by a significant decrease in 2014, aligning with net earnings performance.
Overall, the company demonstrated a peak in earnings and profitability metrics in 2013, with a subsequent downturn in 2014, despite maintaining a consistent asset base during the period. This suggests external factors or operational challenges affecting profitability in the last year analyzed.