Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
PayPal Holdings Inc., profitability ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Operating Profit Margin
- The operating profit margin exhibited a generally increasing trend from 14.2% in 2018 to a peak of 16.8% in 2021. However, it experienced a decline in 2022, falling to 13.94%. This suggests a period of improving operational efficiency followed by a reduction in profitability from core operations in the most recent year.
- Net Profit Margin
- The net profit margin showed steady growth from 13.31% in 2018 to a high of 19.59% in 2020, indicating strong net profitability during that period. Subsequently, it decreased to 16.43% in 2021 and further declined sharply to 8.79% in 2022. This significant drop implies rising costs, lower revenues, or other factors adversely affecting the bottom line in the latest year.
- Return on Equity (ROE)
- Return on equity trended upwards from 13.37% in 2018 to a maximum of 20.99% in 2020, highlighting improved efficiency in generating profits from shareholders' equity. After declining to 19.19% in 2021, it fell more notably to 11.93% in 2022. This trajectory indicates reduced effectiveness in utilizing equity capital most recently.
- Return on Assets (ROA)
- Return on assets showed modest growth from 4.75% in 2018 to 5.97% in 2020, reflecting enhanced asset utilization during those years. It then declined slightly to 5.5% in 2021 followed by a sharper decrease to 3.07% in 2022. The sharp fall suggests diminished efficiency in asset use, impacting overall profitability.
Return on Sales
Return on Investment
Operating Profit Margin
PayPal Holdings Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | 3,837) | 4,262) | 3,289) | 2,719) | 2,194) | |
| Net revenues | 27,518) | 25,371) | 21,454) | 17,772) | 15,451) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 13.94% | 16.80% | 15.33% | 15.30% | 14.20% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Accenture PLC | 15.21% | 15.08% | 14.69% | 14.59% | — | |
| Adobe Inc. | 34.64% | 36.76% | 32.93% | 29.25% | — | |
| Cadence Design Systems Inc. | 30.15% | 26.07% | 24.06% | — | — | |
| CrowdStrike Holdings Inc. | -9.82% | -10.58% | -30.34% | — | — | |
| Fair Isaac Corp. | 39.38% | 38.40% | 22.86% | 21.86% | — | |
| International Business Machines Corp. | 13.50% | 11.97% | 9.22% | — | — | |
| Intuit Inc. | 20.20% | 25.95% | 28.34% | 27.33% | — | |
| Microsoft Corp. | 42.06% | 41.59% | 37.03% | 34.14% | — | |
| Oracle Corp. | 25.74% | 37.58% | 35.57% | — | — | |
| Palantir Technologies Inc. | -8.46% | -26.66% | -107.41% | — | — | |
| Palo Alto Networks Inc. | -3.43% | -7.15% | -5.25% | -1.87% | — | |
| Salesforce Inc. | 2.07% | 2.14% | 1.74% | — | — | |
| ServiceNow Inc. | 4.90% | 4.36% | 4.40% | — | — | |
| Synopsys Inc. | 22.87% | 17.48% | 16.83% | 15.48% | — | |
| Workday Inc. | -2.27% | -5.76% | -13.85% | — | — | |
| Operating Profit Margin, Sector | ||||||
| Software & Services | 27.41% | 28.21% | 24.17% | — | — | |
| Operating Profit Margin, Industry | ||||||
| Information Technology | 26.43% | 26.73% | 22.69% | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Operating profit margin = 100 × Operating income ÷ Net revenues
= 100 × 3,837 ÷ 27,518 = 13.94%
2 Click competitor name to see calculations.
- Operating Income
- The operating income showed a continuous increase from 2018 through 2021, rising from 2,194 million USD to 4,262 million USD, reflecting a strong upward trend in profitability. However, in 2022, there was a noticeable decline to 3,837 million USD, indicating potential challenges or increased expenses during that year.
- Net Revenues
- Net revenues exhibited consistent growth throughout the analyzed period. Starting at 15,451 million USD in 2018, revenues increased annually, reaching 27,518 million USD in 2022. This steady growth suggests a robust expansion in sales or service income.
- Operating Profit Margin
- The operating profit margin improved from 14.2% in 2018 to a peak of 16.8% in 2021, indicating improving operational efficiency and profitability relative to revenues. However, this margin contracted to 13.94% in 2022, marking a decrease in profitability despite higher revenues compared to previous years.
Net Profit Margin
PayPal Holdings Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,419) | 4,169) | 4,202) | 2,459) | 2,057) | |
| Net revenues | 27,518) | 25,371) | 21,454) | 17,772) | 15,451) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 8.79% | 16.43% | 19.59% | 13.84% | 13.31% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Accenture PLC | 11.17% | 11.69% | 11.52% | 11.06% | — | |
| Adobe Inc. | 27.01% | 30.55% | 40.88% | 26.42% | — | |
| Cadence Design Systems Inc. | 23.84% | 23.29% | 22.02% | — | — | |
| CrowdStrike Holdings Inc. | -16.18% | -10.59% | -29.45% | — | — | |
| Fair Isaac Corp. | 27.12% | 29.78% | 18.26% | 16.56% | — | |
| International Business Machines Corp. | 2.71% | 10.01% | 7.59% | — | — | |
| Intuit Inc. | 16.23% | 21.41% | 23.78% | 22.95% | — | |
| Microsoft Corp. | 36.69% | 36.45% | 30.96% | 31.18% | — | |
| Oracle Corp. | 15.83% | 33.96% | 25.94% | — | — | |
| Palantir Technologies Inc. | -19.61% | -33.75% | -106.75% | — | — | |
| Palo Alto Networks Inc. | -4.85% | -11.72% | -7.83% | -2.82% | — | |
| Salesforce Inc. | 5.45% | 19.16% | 0.74% | — | — | |
| ServiceNow Inc. | 4.49% | 3.90% | 2.62% | — | — | |
| Synopsys Inc. | 19.38% | 18.02% | 18.03% | 15.84% | — | |
| Workday Inc. | 0.57% | -6.54% | -13.25% | — | — | |
| Net Profit Margin, Sector | ||||||
| Software & Services | 21.72% | 25.30% | 20.05% | — | — | |
| Net Profit Margin, Industry | ||||||
| Information Technology | 22.45% | 23.62% | 19.67% | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Net profit margin = 100 × Net income ÷ Net revenues
= 100 × 2,419 ÷ 27,518 = 8.79%
2 Click competitor name to see calculations.
- Net Income
- The net income exhibits a notable upward trend from 2018 to 2020, increasing from 2,057 million USD to 4,202 million USD. In 2021, net income slightly decreases to 4,169 million USD and then declines significantly to 2,419 million USD in 2022, indicating volatility in earnings performance toward the end of the period.
- Net Revenues
- Net revenues demonstrate a consistent growth trajectory throughout the examined years, rising steadily from 15,451 million USD in 2018 to 27,518 million USD in 2022. This continuous increase reflects expanding business activities or market presence over the period.
- Net Profit Margin
- The net profit margin displays variability across the years. It increases from 13.31% in 2018 to a peak of 19.59% in 2020, indicating improved profitability efficiency during that time. However, the margin decreases afterwards, falling to 16.43% in 2021 and declining sharply to 8.79% in 2022, which suggests that profitability did not keep pace with revenue growth, potentially due to rising costs or other operational challenges.
Return on Equity (ROE)
PayPal Holdings Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,419) | 4,169) | 4,202) | 2,459) | 2,057) | |
| Total PayPal stockholders’ equity | 20,274) | 21,727) | 20,019) | 16,885) | 15,386) | |
| Profitability Ratio | ||||||
| ROE1 | 11.93% | 19.19% | 20.99% | 14.56% | 13.37% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Accenture PLC | 31.11% | 30.25% | 30.05% | 33.17% | — | |
| Adobe Inc. | 33.85% | 32.59% | 39.66% | 28.03% | — | |
| Cadence Design Systems Inc. | 30.93% | 25.39% | 23.69% | — | — | |
| CrowdStrike Holdings Inc. | -22.89% | -10.64% | -19.10% | — | — | |
| Fair Isaac Corp. | — | — | 71.41% | 66.30% | — | |
| International Business Machines Corp. | 7.47% | 30.38% | 27.14% | — | — | |
| Intuit Inc. | 12.57% | 20.89% | 35.76% | 41.53% | — | |
| Microsoft Corp. | 43.68% | 43.15% | 37.43% | 38.35% | — | |
| Oracle Corp. | — | 262.43% | 83.94% | — | — | |
| Palantir Technologies Inc. | -14.57% | -22.71% | -76.61% | — | — | |
| Palo Alto Networks Inc. | -127.14% | -78.63% | -24.23% | -5.16% | — | |
| Salesforce Inc. | 2.48% | 9.81% | 0.37% | — | — | |
| ServiceNow Inc. | 6.46% | 6.22% | 4.18% | — | — | |
| Synopsys Inc. | 17.85% | 14.31% | 13.54% | 13.04% | — | |
| Workday Inc. | 0.65% | -8.62% | -19.33% | — | — | |
| ROE, Sector | ||||||
| Software & Services | 31.20% | 36.34% | 30.37% | — | — | |
| ROE, Industry | ||||||
| Information Technology | 39.15% | 42.48% | 35.75% | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROE = 100 × Net income ÷ Total PayPal stockholders’ equity
= 100 × 2,419 ÷ 20,274 = 11.93%
2 Click competitor name to see calculations.
The financial data reveals distinct trends in profitability, equity, and return on equity (ROE) over the five-year period ending in 2022.
- Net Income
- Net income increased significantly from 2018 to 2020, rising from $2,057 million to $4,202 million, nearly doubling in that span. This marked growth slowed in 2021 with a slight decline to $4,169 million, followed by a notable decrease in 2022 to $2,419 million. The pattern indicates a period of strong earnings expansion that peaked in 2020 and 2021, succeeded by a sharp contraction in the most recent year.
- Total Stockholders’ Equity
- Stockholders' equity showed a steady upward trajectory from $15,386 million in 2018 to a peak of $21,727 million in 2021. In 2022, equity declined modestly to $20,274 million but remained well above the 2018 baseline. The consistent growth suggests ongoing capital enhancement until 2021, with a slight retrenchment thereafter.
- Return on Equity (ROE)
- ROE mirrored the net income trend closely. Starting at 13.37% in 2018, it improved steadily to a high of 20.99% in 2020, signifying strong profitability relative to shareholders' equity. A marginal decrease to 19.19% occurred in 2021, followed by a pronounced drop to 11.93% in 2022, indicating reduced efficiency in generating returns on equity in the most recent year.
Overall, the data depicts a company that experienced robust earnings growth and improving shareholder returns through 2020 and 2021. However, the sharp declines in net income and ROE in 2022, alongside a slight reduction in equity, point to potential challenges or increased costs impacting profitability and capital efficiency in the latest period.
Return on Assets (ROA)
PayPal Holdings Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income | 2,419) | 4,169) | 4,202) | 2,459) | 2,057) | |
| Total assets | 78,717) | 75,803) | 70,379) | 51,333) | 43,332) | |
| Profitability Ratio | ||||||
| ROA1 | 3.07% | 5.50% | 5.97% | 4.79% | 4.75% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Accenture PLC | 14.55% | 13.68% | 13.78% | 16.04% | — | |
| Adobe Inc. | 17.51% | 17.70% | 21.66% | 14.22% | — | |
| Cadence Design Systems Inc. | 16.53% | 15.87% | 14.95% | — | — | |
| CrowdStrike Holdings Inc. | -6.49% | -3.39% | -10.09% | — | — | |
| Fair Isaac Corp. | 25.90% | 25.01% | 14.72% | 13.40% | — | |
| International Business Machines Corp. | 1.29% | 4.35% | 3.58% | — | — | |
| Intuit Inc. | 7.45% | 13.29% | 16.70% | 24.78% | — | |
| Microsoft Corp. | 19.94% | 18.36% | 14.70% | 13.69% | — | |
| Oracle Corp. | 6.15% | 10.48% | 8.78% | — | — | |
| Palantir Technologies Inc. | -10.80% | -16.02% | -43.35% | — | — | |
| Palo Alto Networks Inc. | -2.18% | -4.87% | -2.95% | -1.24% | — | |
| Salesforce Inc. | 1.52% | 6.14% | 0.23% | — | — | |
| ServiceNow Inc. | 2.44% | 2.13% | 1.36% | — | — | |
| Synopsys Inc. | 10.45% | 8.66% | 8.27% | 8.31% | — | |
| Workday Inc. | 0.28% | -3.24% | -7.05% | — | — | |
| ROA, Sector | ||||||
| Software & Services | 11.41% | 12.29% | 9.68% | — | — | |
| ROA, Industry | ||||||
| Information Technology | 14.57% | 14.67% | 11.45% | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 2,419 ÷ 78,717 = 3.07%
2 Click competitor name to see calculations.
- Net Income
- The net income showed a general increasing trend from 2018 through 2020, rising from 2,057 million US dollars in 2018 to a peak of 4,202 million US dollars in 2020. In 2021, the net income slightly declined to 4,169 million US dollars but remained substantially higher than the levels recorded in 2018 and 2019. However, there was a notable decrease in 2022, with net income dropping to 2,419 million US dollars, approaching levels closer to those seen in 2018.
- Total Assets
- Total assets exhibited consistent growth over the entire period under review. Starting at 43,332 million US dollars at the end of 2018, assets increased steadily year-over-year, reaching 78,717 million US dollars by the end of 2022. This suggests ongoing expansion or asset accumulation activities over the five-year period.
- Return on Assets (ROA)
- The return on assets percentage initially rose slightly from 4.75% in 2018 to 5.97% in 2020, indicating improved efficiency in generating profits from assets. Thereafter, ROA declined to 5.5% in 2021 and further dropped significantly to 3.07% in 2022. This decline in ROA, especially in the last year, suggests a reduction in asset profitability despite the continued growth in total assets.
- Overall Insights
- The data indicates strong growth in net income and asset base up to 2020, followed by a stabilization and eventual decline in profitability metrics by 2022. While the company expanded its asset base consistently, the declining ROA in later years signals that the efficiency in utilizing these assets to produce income weakened significantly. The sharp drop in net income in 2022 alongside decreasing ROA highlights potential operational or market challenges impacting profitability during that period.