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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Two-Component Disaggregation of ROE
Lam Research Corp., decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Jun 29, 2025 | = | × | |||
| Jun 30, 2024 | = | × | |||
| Jun 25, 2023 | = | × | |||
| Jun 26, 2022 | = | × | |||
| Jun 27, 2021 | = | × | |||
| Jun 28, 2020 | = | × |
Based on: 10-K (reporting date: 2025-06-29), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28).
- Return on Assets (ROA)
- The Return on Assets shows an overall upward trend from 15.47% in 2020 to a peak of 26.78% in 2022. Following this peak, there is a decline to 20.42% by 2024, before increasing again to 25.1% in 2025. This pattern indicates strong asset utilization efficiency with some fluctuations, suggesting varying profitability relative to the company's total assets over the periods analyzed.
- Financial Leverage
- The Financial Leverage ratio exhibits a steady downward trend, decreasing from 2.81 in 2020 to 2.16 in 2025. This decline suggests that the company has been gradually reducing its reliance on debt financing or increasing its equity base, which could imply a more conservative capital structure and potentially lower financial risk.
- Return on Equity (ROE)
- The Return on Equity demonstrates significant volatility with a sharp increase from 43.53% in 2020 to a high of 73.35% in 2022, followed by a decrease to 44.82% in 2024 and a partial recovery to 54.33% in 2025. Despite fluctuations, ROE remains elevated, reflecting strong profitability generated from shareholders' equity. The variations may be influenced by changes in both net income and equity levels, as well as the observed reduction in financial leverage.
Three-Component Disaggregation of ROE
Lam Research Corp., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Jun 29, 2025 | = | × | × | ||||
| Jun 30, 2024 | = | × | × | ||||
| Jun 25, 2023 | = | × | × | ||||
| Jun 26, 2022 | = | × | × | ||||
| Jun 27, 2021 | = | × | × | ||||
| Jun 28, 2020 | = | × | × |
Based on: 10-K (reporting date: 2025-06-29), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28).
- Net Profit Margin
- The net profit margin shows an overall increasing trend from 22.42% in 2020 to 29.06% in 2025. The margin rose steadily until 2022, reaching a peak of 26.73%, before experiencing a slight decline in 2023 and 2024. By 2025, it recovered to the highest observed value in the period, indicating improved profitability in the most recent year.
- Asset Turnover
- Asset turnover improved significantly from 0.69 in 2020 to a peak of 1.00 in 2022, suggesting enhanced efficiency in generating revenue from assets during these years. However, after 2022, the ratio declined to 0.86 by 2025, reflecting a decrease in asset utilization efficiency compared to the peak but still exceeding the initial 2020 level.
- Financial Leverage
- Financial leverage exhibited a consistent downward trend over the observed timeframe, dropping from 2.81 in 2020 to 2.16 in 2025. This indicates a gradual reduction in the use of debt relative to equity, suggesting a more conservative capital structure and potentially lower financial risk.
- Return on Equity (ROE)
- Return on equity increased sharply from 43.53% in 2020 to a high of 73.35% in 2022, indicating strong profitability and efficient use of equity during these years. Subsequently, ROE declined to 44.82% in 2024 but rebounded to 54.33% in 2025. The fluctuations suggest varying performance in generating returns on shareholders’ equity, with the 2025 value remaining above the initial 2020 level.
Five-Component Disaggregation of ROE
Lam Research Corp., decomposition of ROE
Based on: 10-K (reporting date: 2025-06-29), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28).
- Tax Burden
- The tax burden ratio remained relatively stable over the observed periods, fluctuating slightly between 0.87 and 0.9. This consistency indicates a steady proportion of earnings retained after taxes without significant variations in tax impact on profits.
- Interest Burden
- The interest burden ratio showed a gradual improvement, increasing from 0.94 in 2020 to 0.97 by 2025. This upward trend suggests enhanced efficiency in managing interest expenses relative to operating income, leading to less erosion of earnings due to interest costs.
- EBIT Margin
- The EBIT margin exhibited fluctuations with an overall upward trend. Starting at 27.4% in 2020, it peaked at 33.29% in 2025 after minor declines around 2023 and 2024. This pattern reflects generally improving operating profitability and effective cost management through the years.
- Asset Turnover
- Asset turnover rose significantly from 0.69 in 2020 to a high of 1.0 in 2022, but subsequently declined to 0.86 by 2025. This suggests an initial period of enhanced efficiency in utilizing assets to generate sales, followed by some reduction in asset utilization effectiveness in later years.
- Financial Leverage
- Financial leverage demonstrated a consistent decrease, falling from 2.81 in 2020 to 2.16 in 2025. This indicates a trend toward reduced reliance on debt financing or equity amplification mechanisms, potentially lowering financial risk but also possibly moderating returns.
- Return on Equity (ROE)
- Return on equity experienced substantial variability, reaching a peak of 73.35% in 2022 before declining to 44.82% in 2024 and rebounding moderately to 54.33% in 2025. The fluctuations correspond with changes in profit margins, asset efficiency, and financial leverage, reflecting dynamic factors influencing shareholder returns.
Two-Component Disaggregation of ROA
Lam Research Corp., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Jun 29, 2025 | = | × | |||
| Jun 30, 2024 | = | × | |||
| Jun 25, 2023 | = | × | |||
| Jun 26, 2022 | = | × | |||
| Jun 27, 2021 | = | × | |||
| Jun 28, 2020 | = | × |
Based on: 10-K (reporting date: 2025-06-29), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28).
- Net Profit Margin
- The net profit margin exhibited a general upward trend over the observed periods. Starting at 22.42% in mid-2020, it increased notably to 26.72% by mid-2021 and remained relatively stable through mid-2022 and mid-2023, with marginal declines in these years to 26.73% and 25.88% respectively. A slight decrease continued into mid-2024 at 25.68%. By mid-2025, the net profit margin improved significantly, reaching 29.06%, the highest in the period under review, indicating an improvement in profitability efficiency relative to revenues.
- Asset Turnover
- Asset turnover showed variability across the years. It started at 0.69 in mid-2020, rose sharply to 0.92 in mid-2021, peaking at 1 in mid-2022, suggesting increased efficiency in using assets to generate sales. However, a decline followed over the next years, dropping to 0.93 in mid-2023 and further to 0.8 in mid-2024. There was a modest recovery by mid-2025 to 0.86, though still below the peak observed in 2022. This fluctuation might reflect changes in asset management or sales generation capacity.
- Return on Assets (ROA)
- ROA exhibited an overall upward trajectory with some fluctuations. Beginning at 15.47% in mid-2020, it increased substantially to 24.59% by mid-2021 and reached a peak of 26.78% in mid-2022, indicating effective utilization of assets to generate earnings. Subsequently, ROA declined to 24.02% in mid-2023 and further to 20.42% in mid-2024, suggesting a reduction in asset efficiency or profitability during this period. By mid-2025, ROA rebounded to 25.1%, signifying a recovery in asset use effectiveness.
- Overall Insights
- The data indicate that profitability and asset efficiency metrics have generally improved over the period, with noticeable peaks around mid-2021 and mid-2022 followed by a dip and subsequent recovery by mid-2025. The net profit margin demonstrates strong profitability resilience, even when asset turnover and ROA decreased temporarily. The recovery in these key ratios by the final period analyzed suggests enhanced operational performance and asset management efficiency towards the end of the timeline.
Four-Component Disaggregation of ROA
Lam Research Corp., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Jun 29, 2025 | = | × | × | × | |||||
| Jun 30, 2024 | = | × | × | × | |||||
| Jun 25, 2023 | = | × | × | × | |||||
| Jun 26, 2022 | = | × | × | × | |||||
| Jun 27, 2021 | = | × | × | × | |||||
| Jun 28, 2020 | = | × | × | × |
Based on: 10-K (reporting date: 2025-06-29), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28).
- Tax Burden
- The tax burden ratio remained relatively stable over the observed periods, fluctuating slightly between 0.87 and 0.9. This indicates that the proportion of earnings retained after taxes has been consistent, with no significant changes in the effective tax rate impacting net profitability.
- Interest Burden
- The interest burden ratio shows a gradual improvement, moving from 0.94 in 2020 to 0.97 in 2025. This trend suggests a decreasing impact of interest expenses on earnings before taxes, reflecting either reduced debt costs or improved operational earnings relative to interest obligations.
- EBIT Margin
- The EBIT margin exhibited an upward trend overall, increasing from 27.4% in 2020 to 33.29% in 2025. Although there were minor fluctuations, the margin clearly improved, indicating enhanced operational efficiency or pricing power leading to higher earnings before interest and taxes as a percentage of revenue.
- Asset Turnover
- Asset turnover displayed variability, rising sharply from 0.69 in 2020 to a peak of 1.0 in 2022 before declining to 0.8 in 2024 and slightly recovering to 0.86 in 2025. This suggests changes in how effectively the company utilized its assets to generate sales, with a notable improvement followed by some reduction in efficiency in later years.
- Return on Assets (ROA)
- Return on assets experienced a significant increase from 15.47% in 2020 to a peak of 26.78% in 2022, followed by a decline to 20.42% in 2024 and a rebound to 25.1% in 2025. The pattern reflects the combined effect of improving profitability and fluctuating asset utilization, ultimately indicating strong but somewhat volatile return performance over the period.
Disaggregation of Net Profit Margin
Lam Research Corp., decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Jun 29, 2025 | = | × | × | ||||
| Jun 30, 2024 | = | × | × | ||||
| Jun 25, 2023 | = | × | × | ||||
| Jun 26, 2022 | = | × | × | ||||
| Jun 27, 2021 | = | × | × | ||||
| Jun 28, 2020 | = | × | × |
Based on: 10-K (reporting date: 2025-06-29), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-25), 10-K (reporting date: 2022-06-26), 10-K (reporting date: 2021-06-27), 10-K (reporting date: 2020-06-28).
- Tax Burden
- The tax burden ratio remained relatively stable over the observed periods, fluctuating minimally between 0.87 and 0.90. This indicates a consistent proportion of earnings retained after tax across the years, suggesting stable tax efficiency and steady tax policy application.
- Interest Burden
- The interest burden ratio showed a slight upward trend from 0.94 in 2020 to 0.97 by 2025. This improvement indicates a gradual reduction in interest expenses relative to earnings before interest and taxes, suggesting better management of debt costs or lower reliance on debt financing over time.
- EBIT Margin
- The EBIT margin exhibited a generally positive trend, increasing from 27.4% in 2020 to 33.29% in 2025. While the margin saw minor fluctuations—slightly declining to around 30.39%-30.5% in the 2023 and 2024 periods—the overall increase reflects enhanced operational efficiency and profitability from core business activities.
- Net Profit Margin
- The net profit margin followed a similar pattern to EBIT margin, rising from 22.42% in 2020 to 29.06% by 2025. Despite a slight dip in 2023 and 2024, the margin remained significantly higher than the starting point. This indicates improvements not only in operational profitability but also in managing other aspects such as taxes and interest, ultimately enhancing net profitability.