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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Two-Component Disaggregation of ROE
NXP Semiconductors N.V., decomposition of ROE (quarterly data)
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Jul 3, 2022 | = | × | |||
| Apr 3, 2022 | = | × | |||
| Dec 31, 2021 | = | × | |||
| Oct 3, 2021 | = | × | |||
| Jul 4, 2021 | = | × | |||
| Apr 4, 2021 | = | × | |||
| Dec 31, 2020 | = | × | |||
| Sep 27, 2020 | = | × | |||
| Jun 28, 2020 | = | × | |||
| Mar 29, 2020 | = | × |
Based on: 10-Q (reporting date: 2022-07-03), 10-Q (reporting date: 2022-04-03), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
The analysis of the quarterly financial data reveals several notable trends in key financial performance indicators over the observed periods.
- Return on Assets (ROA)
- The Return on Assets shows a clear upward trajectory starting from a low positive value of 0.26% in the quarter ending April 4, 2021. The metric steadily increases each quarter, reaching 10.86% by July 3, 2022. This consistent growth suggests improving efficiency in utilizing assets to generate profit.
- Financial Leverage
- Financial Leverage exhibits a gradual increase over time. Beginning at a ratio of 2.16 in March 29, 2020, it rises to approximately 3.24 by July 3, 2022, peaking at 3.28 in April 3, 2022. This upward trend indicates that the company has incrementally increased its use of debt relative to equity, which may amplify returns but also implies higher financial risk.
- Return on Equity (ROE)
- The Return on Equity presents a significant and rapid growth pattern starting from 0.58% in the quarter ending April 4, 2021, escalating sharply to 35.16% by July 3, 2022. This increasing ROE aligns with the rising ROA and higher financial leverage, indicating that the company is generating substantially increased returns for its shareholders, partly driven by the higher leverage.
In summary, the company has demonstrated improving profitability and asset efficiency, reflected in higher ROA and ROE figures. The gradual increase in financial leverage suggests a strategic use of debt financing to enhance shareholder returns, with the corresponding risk requiring careful management. Overall, the upward trends in profitability metrics point to strengthening financial performance during the reviewed periods.
Three-Component Disaggregation of ROE
NXP Semiconductors N.V., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2022-07-03), 10-Q (reporting date: 2022-04-03), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
- Net Profit Margin
- The net profit margin exhibits a consistent upward trend starting from 0.6% in the quarter ending April 4, 2021, and progressively increasing to 19.83% by the quarter ending July 3, 2022. This steady rise indicates improving profitability over the observed periods.
- Asset Turnover
- Asset turnover shows a gradual increase from 0.43 in April 2021 to 0.55 by July 2022. This suggests the company has been enhancing its efficiency in using assets to generate sales during these quarters.
- Financial Leverage
- The financial leverage ratio demonstrates some fluctuation, starting at 2.16 in March 2020, increasing to a peak of 3.28 in April 2022, and slightly declining to 3.24 by July 2022. Overall, there is an upward trend, indicating increased use of debt or other liabilities relative to equity over the longer term.
- Return on Equity (ROE)
- Return on equity reflects a marked and consistent increase from 0.58% in April 2021 to 35.16% by July 2022. The significant improvement indicates the company has been generating substantially greater returns on shareholders' equity throughout the period analyzed.
Two-Component Disaggregation of ROA
NXP Semiconductors N.V., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2022-07-03), 10-Q (reporting date: 2022-04-03), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
The financial data over the examined quarters reveals a consistent and positive trend in all presented performance metrics, indicating improving operational efficiency and profitability.
- Net Profit Margin
- Starting from a modest 0.6% in late 2020, the net profit margin exhibits a steady and substantial increase over the subsequent quarters. It rises to 4.65% and then continues to climb progressively, reaching 19.83% by mid-2022. This upward trajectory suggests enhanced cost management and/or revenue growth leading to greater profitability proportions.
- Asset Turnover
- The asset turnover ratio, reflecting the company's efficiency in using its assets to generate sales, shows a gradual improvement beginning at 0.43 in late 2020. It trends upward consistently, reaching 0.55 by mid-2022. This positive movement implies better utilization of assets to produce revenue over time.
- Return on Assets (ROA)
- The return on assets demonstrates notable growth, increasing from a low base of 0.26% in late 2020 to 10.86% by mid-2022. This increase aligns with improvements in both profit margin and asset turnover, collectively enhancing returns generated from the company's asset base.
In summary, the analyzed periods reflect a strong operational and financial improvement characterized by rising profitability, more effective asset use, and increasing returns on assets. These patterns suggest successful strategic initiatives or market conditions that have positively influenced the company's financial performance over the observed quarters.