Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Teradyne Inc., profitability ratios
Based on: 10-K (reporting date: 2023-12-31), 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).
The profitability profile between 2019 and 2023 exhibits a distinct trajectory characterized by a period of expansion peaking in 2021, followed by a consistent contraction through 2023. While core production efficiency remained relatively stable, there is a marked decline in operational efficiency and bottom-line returns in the latter two years of the period.
- Gross Profit Margin
- The gross profit margin remained remarkably stable throughout the five-year period, oscillating between a low of 57.21% in 2020 and a high of 59.59% in 2021. This consistency indicates that the direct costs of production have been well-managed relative to revenue, regardless of the fluctuations seen in other profitability metrics.
- Operating and Net Profit Margins
- Operating and net margins showed a strong positive correlation, both peaking in 2021 at 32.43% and 27.40%, respectively. Following this peak, a downward trend is observed. By December 31, 2023, the operating profit margin fell to 18.72% and the net profit margin declined to 16.77%. The divergence between the stable gross margin and the falling operating margin suggests an increase in operating expenses or a reduction in operating leverage.
- Return on Equity (ROE) and Return on Assets (ROA)
- Returns on capital and assets mirrored the trend of the net profit margin. ROE rose from 31.58% in 2019 to a peak of 39.59% in 2021, before dropping sharply to 17.77% in 2023. Similarly, ROA increased from 16.77% in 2019 to 26.63% in 2021, eventually declining to 12.87% in 2023. The substantial decrease in these ratios indicates a diminished capacity to generate earnings from the company's asset base and shareholder investments toward the end of the period.
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Gross Profit Margin
Teradyne Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross profit | 1,536,748) | 1,867,151) | 2,206,656) | 1,785,741) | 1,339,829) | |
| Revenues | 2,676,298) | 3,155,045) | 3,702,881) | 3,121,469) | 2,294,965) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 57.42% | 59.18% | 59.59% | 57.21% | 58.38% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 46.12% | 44.93% | 48.25% | — | — | |
| Analog Devices Inc. | 64.01% | 62.70% | 61.83% | 65.87% | — | |
| Applied Materials Inc. | 46.70% | 46.51% | 47.32% | 44.72% | — | |
| Broadcom Inc. | 68.93% | 66.55% | 61.36% | 56.58% | — | |
| Intel Corp. | 40.04% | 42.61% | 55.45% | — | — | |
| KLA Corp. | 59.81% | 61.00% | 59.93% | — | — | |
| Lam Research Corp. | 44.62% | 45.69% | 46.53% | — | — | |
| Marvell Technology Inc. | 50.47% | 46.26% | 50.13% | — | — | |
| Micron Technology Inc. | -9.11% | 45.18% | 37.62% | — | — | |
| NVIDIA Corp. | 56.93% | 64.93% | 62.34% | — | — | |
| Qualcomm Inc. | 55.70% | 57.84% | 57.51% | 60.67% | — | |
| Texas Instruments Inc. | 62.90% | 68.76% | 67.47% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenues
= 100 × 1,536,748 ÷ 2,676,298 = 57.42%
2 Click competitor name to see calculations.
An analysis of the financial performance from 2019 to 2023 reveals a synchronized trajectory between total revenues and gross profit, characterized by a period of rapid growth followed by a moderate contraction. While absolute figures experienced significant volatility, the gross profit margin remained relatively stable throughout the five-year period.
- Revenue and Gross Profit Trends
- A strong upward trend was observed between 2019 and 2021, with revenues increasing from 2,294,965 thousand US$ to a peak of 3,702,881 thousand US$. Gross profit followed this trajectory, peaking in 2021 at 2,206,656 thousand US$. However, a reversal occurred in 2022 and 2023, with revenues declining to 2,676,298 thousand US$ and gross profit falling to 1,536,748 thousand US$ by the end of 2023.
- Gross Profit Margin Stability
- Despite the fluctuations in top-line revenue, the gross profit margin exhibited resilience, fluctuating within a narrow range between 57.21% and 59.59%. The margin dipped slightly in 2020 to 57.21% before reaching a five-year high of 59.59% in 2021. By December 31, 2023, the margin settled at 57.42%, indicating that the cost of goods sold scaled proportionally with the decline in revenue.
- Comparative Performance Analysis
- The period from 2021 to 2023 represents a correction phase. Although the 2023 gross profit of 1,536,748 thousand US$ remains higher than the 2019 level of 1,339,829 thousand US$, the gross profit margin of 57.42% is lower than the 58.38% recorded in 2019. This suggests a slight erosion in production efficiency or pricing power compared to the start of the analyzed period.
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Operating Profit Margin
Teradyne Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Income from operations | 501,068) | 831,939) | 1,200,720) | 928,407) | 553,654) | |
| Revenues | 2,676,298) | 3,155,045) | 3,702,881) | 3,121,469) | 2,294,965) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 18.72% | 26.37% | 32.43% | 29.74% | 24.12% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 1.77% | 5.36% | 22.20% | — | — | |
| Analog Devices Inc. | 31.07% | 27.29% | 23.12% | 26.74% | — | |
| Applied Materials Inc. | 28.86% | 30.20% | 29.87% | 25.37% | — | |
| Broadcom Inc. | 45.25% | 42.84% | 31.03% | 16.80% | — | |
| Intel Corp. | 0.17% | 3.70% | 24.62% | — | — | |
| KLA Corp. | 38.06% | 39.67% | 35.97% | — | — | |
| Lam Research Corp. | 29.69% | 31.24% | 30.64% | — | — | |
| Marvell Technology Inc. | 4.02% | -7.79% | -8.70% | — | — | |
| Micron Technology Inc. | -36.97% | 31.54% | 22.68% | — | — | |
| NVIDIA Corp. | 15.66% | 37.31% | 27.18% | — | — | |
| Qualcomm Inc. | 21.74% | 35.88% | 29.16% | 26.58% | — | |
| Texas Instruments Inc. | 41.85% | 50.63% | 48.84% | — | — | |
| Operating Profit Margin, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 18.20% | 26.84% | 27.90% | — | — | |
| Operating Profit Margin, Industry | ||||||
| Information Technology | 24.34% | 26.23% | 26.58% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
Operating profit margin = 100 × Income from operations ÷ Revenues
= 100 × 501,068 ÷ 2,676,298 = 18.72%
2 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by a period of significant expansion followed by a pronounced contraction in both top-line revenue and operational profitability.
- Revenue and Operational Income Trends
- Revenues increased steadily from 2019, reaching a peak of US$ 3,702,881 thousand in 2021 before declining over the subsequent two years. Income from operations followed a similar trajectory, peaking in 2021 at US$ 1,200,720 thousand. By 2023, operating income had fallen to US$ 501,068 thousand, a value lower than the 2019 baseline despite revenues remaining higher than those of 2019.
- Operating Profit Margin Volatility
- The operating profit margin exhibited a bell-shaped trend over the five-year period. After starting at 24.12% in 2019, the margin expanded for two consecutive years, peaking at 32.43% in 2021. This indicates a period of enhanced operational efficiency or favorable pricing power. However, a sharp reversal occurred in 2022 and 2023, with the margin contracting to 26.37% and 18.72% respectively.
- Analysis of Profitability Erosion
- A significant divergence is observed between the rate of revenue decline and the rate of operating income decline. From the 2021 peak to 2023, revenues decreased by approximately 27.7%, whereas income from operations plummeted by approximately 58.3%. This disproportionate decrease indicates a loss of operating leverage, resulting in the 2023 operating profit margin becoming the lowest in the recorded period.
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Net Profit Margin
Teradyne Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 448,752) | 715,501) | 1,014,589) | 784,147) | 467,468) | |
| Revenues | 2,676,298) | 3,155,045) | 3,702,881) | 3,121,469) | 2,294,965) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 16.77% | 22.68% | 27.40% | 25.12% | 20.37% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 3.77% | 5.59% | 19.24% | — | — | |
| Analog Devices Inc. | 26.94% | 22.88% | 19.00% | 21.79% | — | |
| Applied Materials Inc. | 25.86% | 25.31% | 25.53% | 21.04% | — | |
| Broadcom Inc. | 39.31% | 34.62% | 24.54% | 12.39% | — | |
| Intel Corp. | 3.11% | 12.71% | 25.14% | — | — | |
| KLA Corp. | 32.27% | 36.06% | 30.04% | — | — | |
| Lam Research Corp. | 25.88% | 26.73% | 26.72% | — | — | |
| Marvell Technology Inc. | -2.76% | -9.44% | -9.34% | — | — | |
| Micron Technology Inc. | -37.54% | 28.24% | 21.16% | — | — | |
| NVIDIA Corp. | 16.19% | 36.23% | 25.98% | — | — | |
| Qualcomm Inc. | 20.19% | 29.27% | 26.94% | 22.09% | — | |
| Texas Instruments Inc. | 37.16% | 43.68% | 42.35% | — | — | |
| Net Profit Margin, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 16.64% | 25.04% | 25.45% | — | — | |
| Net Profit Margin, Industry | ||||||
| Information Technology | 20.24% | 22.27% | 23.48% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
Net profit margin = 100 × Net income ÷ Revenues
= 100 × 448,752 ÷ 2,676,298 = 16.77%
2 Click competitor name to see calculations.
An analysis of the financial performance from 2019 to 2023 reveals a cyclical trend characterized by a period of significant growth and margin expansion followed by a notable contraction in both absolute earnings and operational efficiency.
- Net Profit Margin Trajectory
- The net profit margin exhibited a consistent upward trend between 2019 and 2021, increasing from 20.37% to a peak of 27.40%. This expansion indicates a period of enhanced profitability and efficient cost management relative to revenue growth. However, a reversal occurred after 2021, with the margin declining to 22.68% in 2022 and further contracting to 16.77% by December 31, 2023, marking the lowest profitability level within the five-year period.
- Correlation Between Revenue and Net Income
- Revenue and net income patterns closely mirrored one another, both reaching their maximum values in 2021. Revenues peaked at US$ 3,702,881 thousand, while net income reached US$ 1,014,589 thousand. The subsequent decline in revenues to US$ 2,676,298 thousand by 2023 was accompanied by a more pronounced decrease in net income, which fell to US$ 448,752 thousand. This disproportionate drop in net income relative to revenue confirms the compression of the net profit margin.
- Operational Profitability Analysis
- The data suggests a significant erosion of profitability in the latter two years of the period. The transition from a 27.40% margin in 2021 to 16.77% in 2023 indicates that the organization faced challenges in maintaining its cost structure as revenues declined. This downward trend in margin suggests that operating expenses or other non-operating costs did not decrease at the same rate as the top-line revenue contraction.
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Return on Equity (ROE)
Teradyne Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 448,752) | 715,501) | 1,014,589) | 784,147) | 467,468) | |
| Shareholders’ equity | 2,525,897) | 2,451,294) | 2,562,444) | 2,207,018) | 1,480,158) | |
| Profitability Ratio | ||||||
| ROE1 | 17.77% | 29.19% | 39.59% | 35.53% | 31.58% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 1.53% | 2.41% | 42.18% | — | — | |
| Analog Devices Inc. | 9.32% | 7.54% | 3.66% | 10.17% | — | |
| Applied Materials Inc. | 41.94% | 53.51% | 48.08% | 34.21% | — | |
| Broadcom Inc. | 58.70% | 50.62% | 26.99% | 12.40% | — | |
| Intel Corp. | 1.60% | 7.90% | 20.83% | — | — | |
| KLA Corp. | 116.01% | 237.04% | 61.53% | — | — | |
| Lam Research Corp. | 54.94% | 73.35% | 64.85% | — | — | |
| Marvell Technology Inc. | -1.05% | -2.68% | -3.29% | — | — | |
| Micron Technology Inc. | -13.22% | 17.41% | 13.34% | — | — | |
| NVIDIA Corp. | 19.76% | 36.65% | 25.64% | — | — | |
| Qualcomm Inc. | 33.51% | 71.81% | 90.88% | 85.54% | — | |
| Texas Instruments Inc. | 38.53% | 60.02% | 58.27% | — | — | |
| ROE, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 12.69% | 21.59% | 24.91% | — | — | |
| ROE, Industry | ||||||
| Information Technology | 31.26% | 38.03% | 41.64% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × 448,752 ÷ 2,525,897 = 17.77%
2 Click competitor name to see calculations.
The financial performance between 2019 and 2023 is characterized by a period of rapid growth in profitability followed by a notable contraction. This cycle is most evident in the volatility of net income and the resulting impact on the efficiency of shareholder capital.
- Net Income Trends
- Net income experienced a significant ascent from 467,468 thousand US$ in 2019 to a peak of 1,014,589 thousand US$ in 2021. Following this peak, a downward trend emerged, with earnings decreasing to 715,501 thousand US$ in 2022 and further declining to 448,752 thousand US$ by December 31, 2023, returning to a level slightly below the 2019 baseline.
- Shareholders' Equity Evolution
- Equity grew substantially during the first half of the period, rising from 1,480,158 thousand US$ in 2019 to 2,562,444 thousand US$ in 2021. In contrast to the volatility seen in earnings, equity remained relatively stable through 2022 and 2023, concluding the period at 2,525,897 thousand US$.
- Return on Equity (ROE) Dynamics
- The ROE followed a bell-shaped trajectory, increasing from 31.58% in 2019 to a peak of 39.59% in 2021. A sharp contraction occurred thereafter, with ROE falling to 29.19% in 2022 and reaching a period low of 17.77% in 2023. This compression is primarily driven by the decline in net income occurring while the equity base remained elevated, indicating a reduction in the return generated per unit of shareholder investment.
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Return on Assets (ROA)
Teradyne Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 448,752) | 715,501) | 1,014,589) | 784,147) | 467,468) | |
| Total assets | 3,486,824) | 3,501,252) | 3,809,425) | 3,652,346) | 2,787,014) | |
| Profitability Ratio | ||||||
| ROA1 | 12.87% | 20.44% | 26.63% | 21.47% | 16.77% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Advanced Micro Devices Inc. | 1.26% | 1.95% | 25.46% | — | — | |
| Analog Devices Inc. | 6.79% | 5.46% | 2.66% | 5.69% | — | |
| Applied Materials Inc. | 22.31% | 24.41% | 22.80% | 16.19% | — | |
| Broadcom Inc. | 19.33% | 15.69% | 8.91% | 3.90% | — | |
| Intel Corp. | 0.88% | 4.40% | 11.80% | — | — | |
| KLA Corp. | 24.07% | 26.37% | 20.23% | — | — | |
| Lam Research Corp. | 24.02% | 26.78% | 24.59% | — | — | |
| Marvell Technology Inc. | -0.73% | -1.90% | -2.58% | — | — | |
| Micron Technology Inc. | -9.08% | 13.11% | 9.96% | — | — | |
| NVIDIA Corp. | 10.61% | 22.07% | 15.05% | — | — | |
| Qualcomm Inc. | 14.17% | 26.39% | 21.93% | 14.60% | — | |
| Texas Instruments Inc. | 20.12% | 32.16% | 31.48% | — | — | |
| ROA, Sector | ||||||
| Semiconductors & Semiconductor Equipment | 7.13% | 12.17% | 13.29% | — | — | |
| ROA, Industry | ||||||
| Information Technology | 12.34% | 14.33% | 14.52% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 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).
1 2023 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 448,752 ÷ 3,486,824 = 12.87%
2 Click competitor name to see calculations.
The financial performance from 2019 to 2023 is characterized by a significant peak in profitability and asset efficiency in 2021, followed by a consistent contraction. The overall trend indicates a cyclical movement where initial growth in earnings and asset base reversed in the final two years of the period.
- Net Income Trends
- Net income experienced substantial growth between 2019 and 2021, rising from US$ 467.47 million to a peak of US$ 1,014.59 million. However, this trajectory shifted downward starting in 2022, with earnings falling to US$ 715.50 million and further declining to US$ 448.75 million by the end of 2023, representing a return to levels slightly below those observed in 2019.
- Asset Base Evolution
- Total assets grew from US$ 2.79 billion in 2019 to a high of US$ 3.81 billion in 2021. Following this peak, the asset base underwent a slight reduction, stabilizing at approximately US$ 3.49 billion in 2023. The relative stability of assets compared to the sharper decline in net income suggests that the reduction in profitability was not driven by a divestment of assets.
- Return on Assets (ROA) Performance
- The ROA followed a similar trajectory to net income, increasing from 16.77% in 2019 to a maximum of 26.63% in 2021. A subsequent downturn saw the ratio drop to 20.44% in 2022 and reach a period low of 12.87% in 2023. This decline highlights a reduction in the effectiveness of asset utilization for profit generation, with the 2023 ROA being the lowest recorded value in the five-year analysis.
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