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.
Two-Component Disaggregation of ROE
Yahoo! Inc., decomposition of ROE
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Return on Assets (ROA)
- The Return on Assets demonstrated significant volatility over the observed period. It started at a high level of 23.07% in 2012, then declined sharply to 8.13% in 2013. A moderate recovery was noted in 2014 with ROA increasing to 12.14%. However, the following two years saw negative returns, with -9.64% in 2015 and a further decline to -0.45% in 2016, indicating challenges in effective asset utilization toward the end of the period.
- Financial Leverage
- Financial leverage showed a consistent upward trend from 1.17 in 2012 to 1.6 in 2014, reflecting an increasing reliance on debt or other liabilities relative to equity. This level then stabilized with minor fluctuations, registering 1.56 in 2015 and 1.55 in 2016, suggesting the company maintained a relatively steady capital structure after the rise in leverage.
- Return on Equity (ROE)
- Return on Equity followed a trajectory similar to ROA, starting at 27.1% in 2012, then declining to 10.45% in 2013. It rebounded to 19.42% in 2014, demonstrating improved profitability from shareholders' equity. Nevertheless, significant decreases occurred in 2015 and 2016, with negative returns of -15.01% and -0.69%, respectively. The negative ROE in these years highlights difficulties in generating returns for equity holders despite the stable leverage levels.
Three-Component Disaggregation of ROE
Yahoo! Inc., decomposition of ROE
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Net Profit Margin
- The net profit margin experienced significant fluctuations over the observed period. Starting at a high level of 79.12% in 2012, it declined sharply to 29.19% in 2013 before rising dramatically to 162.87% in 2014. However, these positive margins were followed by a steep decline into negative territory, with -87.74% in 2015 and further improvement to -4.15% in 2016. This volatility indicates substantial variability in profitability, suggesting periods of exceptional gains as well as notable losses.
- Asset Turnover
- Asset turnover remained relatively low throughout the period, indicating modest efficiency in generating sales from assets. It decreased slightly from 0.29 in 2012 to 0.28 in 2013, then dropped more significantly to 0.07 in 2014. A moderate recovery occurred in 2015 and 2016, where the ratio stabilized at 0.11. Overall, asset utilization was weak, and the slight recovery in later years does not fully compensate for earlier declines.
- Financial Leverage
- Financial leverage increased progressively from 1.17 in 2012 to 1.60 in 2014, indicating a growing reliance on debt financing relative to equity. After peaking in 2014, leverage dipped slightly to 1.56 in 2015 and 1.55 in 2016 but remained elevated compared to the initial year. This upward trend suggests an increasing degree of financial risk and potential pressure on the company’s capital structure.
- Return on Equity (ROE)
- ROE followed a volatile trajectory, mirroring the instability observed in profitability. It decreased from 27.1% in 2012 to 10.45% in 2013, improved to 19.42% in 2014, then sharply reversed to a negative return of -15.01% in 2015 and marginally recovered to -0.69% in 2016. This pattern reflects inconsistent shareholder returns, with periods of positive value generation followed by significant losses.
Five-Component Disaggregation of ROE
Yahoo! Inc., decomposition of ROE
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Tax Burden
- The tax burden ratio exhibited considerable fluctuations, starting at 0.67 in 2012, rising sharply to 0.9 in 2013, and then decreasing to 0.65 in 2014. Data for the years 2015 and 2016 is not available, limiting the ability to assess recent trends.
- Interest Burden
- This ratio remained relatively stable across the available years, slightly decreasing from 1.00 in 2012 to 0.99 in 2013 and maintaining that level in 2014. No data is provided for subsequent years.
- EBIT Margin
- The EBIT margin demonstrated significant volatility, with an exceptionally high margin of 118.21% in 2012, followed by a decline to 32.77% in 2013. A dramatic increase occurred in 2014, reaching 251.8%. However, this positive trend reversed in 2015 and 2016, where negative margins of -88.09% and -5.16% were reported, indicating operating losses during those years.
- Asset Turnover
- Asset turnover showed a downward trend from 0.29 in 2012 to 0.07 in 2014, indicating decreasing efficiency in generating revenue from assets. A slight recovery is noted in 2015 and 2016, both at 0.11, but levels remain below the earlier years.
- Financial Leverage
- Financial leverage increased steadily from 1.17 in 2012 to a peak of 1.60 in 2014, followed by a slight decline to about 1.55 in 2016. This suggests a gradual increase in reliance on debt financing over the period with a minor reduction towards the end.
- Return on Equity (ROE)
- The ROE mirrors the volatility seen in EBIT margins. Starting at a healthy level of 27.1% in 2012, it fell sharply to 10.45% in 2013, rebounded to 19.42% in 2014, and then declined to negative returns of -15.01% in 2015 and -0.69% in 2016. This trend reflects deteriorating profitability and shareholder returns in the latter years.
Two-Component Disaggregation of ROA
Yahoo! Inc., decomposition of ROA
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Net Profit Margin
- The net profit margin exhibited considerable volatility over the five-year period. It started at a high level of 79.12% in 2012, decreased significantly to 29.19% in 2013, then surged sharply to 162.87% in 2014. Following this peak, it experienced a dramatic decline, turning negative with -87.74% in 2015 and slightly improving but remaining negative at -4.15% in 2016. This pattern indicates unstable profitability, with periods of both exceptional gains and substantial losses.
- Asset Turnover
- Asset turnover showed a relatively stable but low level throughout the period. It started at 0.29 in 2012, slightly decreased to 0.28 in 2013, and then dropped noticeably to 0.07 in 2014. After this decline, it modestly increased to 0.11 in 2015, maintaining the same level in 2016. This suggests a deterioration in the efficiency with which the company utilized its assets to generate sales between 2012 and 2014, followed by a partial recovery.
- Return on Assets (ROA)
- The return on assets mirrored the net profit margin's trend but with less extreme fluctuations. It started positively at 23.07% in 2012, fell to 8.13% in 2013, and then rebounded to 12.14% in 2014. However, ROA turned negative afterwards, reaching -9.64% in 2015 and slightly improving to -0.45% in 2016. This indicates declining overall profitability and asset utilization effectiveness in the latter years.
Four-Component Disaggregation of ROA
Yahoo! Inc., decomposition of ROA
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Tax Burden
- The tax burden ratio demonstrated notable variability during the analyzed period. It increased sharply from 0.67 in 2012 to 0.9 in 2013, indicating a higher proportion of earnings retained after tax in 2013. However, it declined to 0.65 in 2014, and data for subsequent years is not available, leaving the trend incomplete beyond 2014.
- Interest Burden
- The interest burden ratio remained relatively stable across the available data, decreasing slightly from 1.00 in 2012 to 0.99 in 2013 and 2014. This suggests minor changes in interest expenses relative to earnings before interest and taxes over this timeframe, with no data provided beyond 2014.
- EBIT Margin
- The EBIT margin showed significant fluctuation over the five-year period. It was exceptionally high in 2012 at 118.21%, followed by a sharp decrease to 32.77% in 2013. In 2014, the margin surged dramatically to 251.8%, an unusual peak that may indicate abnormal earnings or a one-time event. Subsequently, it turned negative in 2015 and 2016, at -88.09% and -5.16% respectively, reflecting deteriorating operating profitability and operational challenges in the later years.
- Asset Turnover
- Asset turnover gradually declined from 0.29 in 2012 to 0.28 in 2013, then experienced a sharp drop to 0.07 in 2014. After that, it recovered partially to 0.11 in 2015 and held steady through 2016. This indicates a decrease in efficiency in generating revenue from assets particularly in 2014, followed by some improvement but remaining at a relatively low level thereafter.
- Return on Assets (ROA)
- Return on assets decreased substantially over the period. It was positive at 23.07% in 2012 but dropped to 8.13% in 2013. Although there was some recovery to 12.14% in 2014, the ROA became negative in 2015 and 2016, reaching -9.64% and -0.45% respectively. This decline corresponds with the negative EBIT margins in later years, signaling reduced overall profitability and efficiency in asset utilization.
Disaggregation of Net Profit Margin
Yahoo! Inc., decomposition of net profit margin ratio
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Tax Burden
- The tax burden ratio exhibited fluctuations over the reported periods. It increased notably from 0.67 in 2012 to 0.9 in 2013, indicating a higher proportion of earnings retained after tax. However, it declined to 0.65 by 2014, with no available data for subsequent years, suggesting variability or potential changes in tax obligations or strategies during the period.
- Interest Burden
- The interest burden ratio remained relatively stable, close to 1 across 2012 to 2014, with values of 1.00, 0.99, and 0.99 respectively. This stability implies consistent interest expense relative to earnings before interest and taxes during these years, although data for later years is missing.
- EBIT Margin
- The EBIT margin experienced significant volatility. It started at a very high level in 2012 (118.21%), dropped sharply in 2013 to 32.77%, then surged to 251.8% in 2014. Subsequently, it turned negative in 2015 (-88.09%) and further declined in 2016 (-5.16%). This pattern suggests substantial fluctuations in operating profitability, possibly due to extraordinary items, restructuring, or significant changes in operational efficiency or revenue recognition.
- Net Profit Margin
- Net profit margin mirrored the volatility observed in the EBIT margin. The margin decreased from 79.12% in 2012 to 29.19% in 2013, then increased sharply to 162.87% in 2014. Similar to EBIT margin, it turned negative in 2015 (-87.74%) and remained negative in 2016 (-4.15%). These variations point to inconsistent profitability at the net income level, potentially influenced by non-operating income, taxes, or extraordinary expenses in the latter years.