PepsiCo Inc. (NASDAQ:PEP)

The analysis reveals fluctuations in Return on Assets (ROA), Financial Leverage, and Return on Equity (ROE) over the observed period. ROE demonstrates a clear relationship with both ROA and Financial Leverage, as expected by the DuPont analysis framework. Initial values show a relatively strong ROE, followed by a period of decline and subsequent recovery, influenced by movements in its component ratios.

Return on Assets (ROA)

ROA began at 10.93% in March 2022 and generally decreased through December 2022, reaching 9.67%. A subsequent increase was observed through December 2023, peaking at 9.03%. The trend continued upward into March 2024, reaching 9.18%, before stabilizing around the 9% mark through September 2024. A slight decline occurred in December 2024, followed by a more pronounced decrease in March 2025 to 7.17%, and a further drop in September 2025 to 6.78%, before a partial recovery to 7.67% in December 2025. This suggests potential shifts in asset utilization efficiency over time.

Financial Leverage

Financial Leverage exhibited relative stability between March 2022 (5.11) and September 2022 (4.98). An increase was noted in December 2022 (5.38), continuing into March 2023 (5.46). Leverage remained relatively consistent through September 2023 (5.31) before increasing again in December 2023 (5.43). A slight decrease occurred through June 2024 (5.12), followed by an increase to 5.51 in December 2024. The leverage ratio peaked at 5.72 in March 2025, then decreased to 5.50 in September 2025, and finally to 5.26 in December 2025. This indicates changes in the company’s capital structure and debt financing.

Return on Equity (ROE)

ROE started at a high of 55.85% in March 2022, declining to 49.78% by June 2022 and continuing to decrease to 51.19% in September 2022, before stabilizing at 51.96% in December 2022. A significant drop was observed in March 2023 (38.62%), followed by a recovery through December 2023 (49.04%). ROE remained relatively stable through September 2024 (48.10%), then increased to 53.09% in December 2024. A substantial decline occurred in March 2025 (40.99%), continuing through September 2025 (37.26%), before a partial recovery to 40.38% in December 2025. The fluctuations in ROE closely mirror the combined effects of changes in ROA and Financial Leverage.

The observed decline in ROE from March 2022 to March 2023 appears to be primarily driven by a decrease in ROA, despite a slight increase in Financial Leverage. The subsequent recovery in ROE through December 2023 and into 2024 is attributable to improvements in both ROA and Financial Leverage. The more recent decline in ROE, beginning in March 2025, is largely due to a significant decrease in ROA, even with a high level of Financial Leverage. This suggests that the company’s profitability relative to its assets is a key driver of overall shareholder returns.

The analysis of the presented financial metrics reveals fluctuations in profitability, efficiency, and financial leverage over the observed period. Return on Equity (ROE) demonstrates considerable variability, influenced by changes in its component ratios. A general trend of declining performance in the earlier part of the period, followed by a recovery and subsequent stabilization, is apparent.

Net Profit Margin

The Net Profit Margin experienced a decline from 12.57% in March 2022 to a low of 7.48% in March 2023. A subsequent recovery occurred, peaking at 10.43% in December 2024, before decreasing to 8.77% in December 2025. This suggests potential improvements in cost management or pricing strategies following the initial decline, with a slight weakening in the most recent quarter. The margin generally stabilized between 9% and 10.5% from September 2023 onwards.

Asset Turnover

Asset Turnover remained relatively stable throughout the period, fluctuating within a narrow range of 0.87 to 0.95. A slight downward trend is observable from the initial value of 0.87 in March 2022 to 0.87 in December 2025, indicating a marginally decreasing efficiency in utilizing assets to generate sales. However, these changes are minimal and do not represent a significant shift in operational efficiency.

Financial Leverage

Financial Leverage exhibited an increasing trend from 5.11 in March 2022 to a peak of 5.72 in June 2025, before decreasing to 5.26 in December 2025. This indicates a greater reliance on debt financing over time, amplifying the impact of profitability on shareholder equity. The increase in leverage contributed to higher ROE during periods of positive net profit margin, but also increased financial risk. The recent decrease suggests a potential shift towards a more conservative capital structure.

Return on Equity (ROE)

ROE mirrored the fluctuations in its component ratios. It began at a high of 55.85% in March 2022, then decreased significantly to 38.62% in March 2023, coinciding with the decline in Net Profit Margin. ROE recovered to a peak of 53.09% in December 2024, driven by improvements in both Net Profit Margin and Financial Leverage. A subsequent decline to 40.38% in December 2025 suggests the impact of a slight decrease in Net Profit Margin and a reduction in Financial Leverage. Overall, ROE demonstrates a strong correlation with changes in profitability and the degree of financial leverage employed.

The interplay between these three components – profitability, efficiency, and leverage – significantly influenced the observed ROE performance. The period demonstrates a sensitivity of ROE to changes in Net Profit Margin, while Asset Turnover remained a relatively stable factor. The increasing and then decreasing Financial Leverage amplified these effects, highlighting the importance of managing debt levels in relation to profitability.

The financial performance, as indicated by the two-component disaggregation of Return on Assets (ROA), exhibits notable fluctuations over the observed period. A general trend of initial decline followed by stabilization and then a slight resurgence is apparent. The analysis focuses on Net Profit Margin and Asset Turnover, and their combined effect on ROA.

Net Profit Margin

The Net Profit Margin demonstrates a decreasing trend from 12.57% in March 2022 to a low of 7.48% in March 2023. A subsequent recovery is observed, peaking at 10.43% in December 2024, before decreasing to 8.77% in December 2025. This suggests potential pressures on profitability in the earlier part of the period, followed by improved cost management or pricing strategies, and then a slight softening again. The most recent value indicates a return towards levels seen in the latter half of 2023.

Asset Turnover

Asset Turnover remains relatively stable throughout the period, fluctuating within a narrow range of 0.87 to 0.95. A slight downward trend is visible from March 2022 (0.87) to September 2023 (0.92), followed by a stabilization around 0.92, and a slight decline to 0.87 by December 2025. This indicates consistent efficiency in utilizing assets to generate revenue, with minimal changes in operational efficiency over the observed timeframe.

Return on Assets (ROA)

ROA mirrors the trends observed in Net Profit Margin. It declines from 10.93% in March 2022 to a low of 7.07% in March 2023, coinciding with the decrease in Net Profit Margin. ROA then recovers, reaching 9.63% in December 2024, before settling at 7.67% in December 2025. The correlation between ROA and Net Profit Margin is strong, indicating that profitability is the primary driver of ROA fluctuations, as Asset Turnover remains comparatively stable. The recent ROA value suggests a partial recovery but remains below the levels observed in the earlier part of the period.

In summary, the observed performance is largely influenced by changes in profitability. While asset utilization remains consistent, fluctuations in Net Profit Margin significantly impact the overall Return on Assets. The recent period shows a stabilization, but further monitoring is warranted to assess the sustainability of the current performance levels.