Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
eBay Inc., profitability ratios
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
The profitability profile from 2014 to 2018 is characterized by stable gross margins, a gradual contraction in operating efficiency after 2016, and extreme volatility in bottom-line returns, particularly during the 2016-2017 period.
- Gross Profit Margin
- A significant increase occurred between 2014 and 2015, where the margin rose from 67.98% to 79.39%. Following this expansion, the ratio remained relatively stable, fluctuating within a narrow range between 76.77% and 77.83% from 2016 through 2018, indicating a consistent ability to manage direct costs relative to revenue.
- Operating Profit Margin
- Operating efficiency improved markedly from 19.63% in 2014 to a peak of 25.89% in 2016. However, a downward trend followed this peak, with the margin declining to 23.68% in 2017 and further to 20.68% by 2018, suggesting an increase in operating expenses as a percentage of total revenue.
- Net Profit Margin and Bottom-Line Volatility
- The net profit margin exhibited extreme fluctuations that deviate sharply from operating trends. After a near-zero start in 2014, it reached an anomalous peak of 80.92% in 2016 before collapsing to -10.62% in 2017. A recovery to 23.54% was observed in 2018. This volatility indicates the presence of significant non-operating items or one-time financial events rather than core operational shifts.
- Return on Equity (ROE) and Return on Assets (ROA)
- The returns on equity and assets mirrored the volatility of the net profit margin. ROE surged from 0.23% in 2014 to 68.94% in 2016, dipped into negative territory at -12.60% in 2017, and rebounded to 40.28% in 2018. Similarly, ROA moved from 0.10% in 2014 to a high of 30.47% in 2016, falling to -3.91% in 2017 before recovering to 11.09% in 2018.
In summary, while the company maintained a strong and stable gross margin, the divergence between operating margins and net returns suggests that bottom-line profitability was heavily influenced by non-recurring items, particularly in 2016 and 2017, while operational efficiency experienced a slight decline in the latter half of the period.
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Return on Sales
Return on Investment
Gross Profit Margin
eBay Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 8,364) | 7,345) | 6,972) | 6,821) | 12,170) | |
| Net revenues | 10,746) | 9,567) | 8,979) | 8,592) | 17,902) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 77.83% | 76.77% | 77.65% | 79.39% | 67.98% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Gross profit margin = 100 × Gross profit ÷ Net revenues
= 100 × 8,364 ÷ 10,746 = 77.83%
2 Click competitor name to see calculations.
Between 2014 and 2018, a significant structural shift occurred in the financial profile, characterized by a sharp contraction in overall scale followed by a period of consistent growth and enhanced margin efficiency.
- Gross Profit Margin Evolution
- A substantial increase in the gross profit margin is observed between 2014 and 2015, rising from 67.98% to 79.39%. Following this peak, the margin experienced a slight compression through 2017, reaching a low of 76.77%, before recovering to 77.83% in 2018. This trajectory indicates a transition toward a higher-margin revenue mix starting in 2015.
- Revenue and Profitability Trajectory
- Net revenues decreased sharply from $17,902 million in 2014 to $8,592 million in 2015. However, from 2015 onward, a steady upward trend is evident, with net revenues increasing annually to reach $10,746 million by 2018. Gross profit mirrored this recovery, growing from $6,821 million in 2015 to $8,364 million in 2018.
- Operational Efficiency Analysis
- The inverse relationship between the decline in total revenue and the expansion of the gross profit margin between 2014 and 2015 suggests the removal of low-margin business segments. The subsequent stabilization of the margin within the 76% to 79% range reflects a consistent cost-of-sales structure and sustainable operational efficiency over the final four years of the analyzed period.
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Operating Profit Margin
eBay Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Income from operations | 2,222) | 2,265) | 2,325) | 2,197) | 3,514) | |
| Net revenues | 10,746) | 9,567) | 8,979) | 8,592) | 17,902) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 20.68% | 23.68% | 25.89% | 25.57% | 19.63% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Operating profit margin = 100 × Income from operations ÷ Net revenues
= 100 × 2,222 ÷ 10,746 = 20.68%
2 Click competitor name to see calculations.
The financial performance between 2014 and 2018 is characterized by a significant structural shift in revenue followed by a period of steady top-line growth and a subsequent decline in operational efficiency.
- Net Revenue Trends
- A substantial contraction in net revenues occurred between 2014 and 2015, with figures falling from 17,902 million US$ to 8,592 million US$. Following this adjustment, a consistent recovery trend was observed, as revenues grew annually to reach 10,746 million US$ by December 31, 2018.
- Income from Operations
- Operating income decreased from 3,514 million US$ in 2014 to 2,197 million US$ in 2015. For the remainder of the period, operating income remained relatively stagnant; after a slight increase to 2,325 million US$ in 2016, a gradual downward trend emerged, resulting in 2,222 million US$ by the end of 2018.
- Operating Profit Margin Analysis
- The operating profit margin experienced a sharp increase during the initial transition, rising from 19.63% in 2014 to a peak of 25.89% in 2016. However, a continuous decline is evident from 2016 through 2018, with the margin falling to 20.68%. The divergence between increasing net revenues and decreasing operating income after 2016 indicates that operating expenses grew at a faster rate than revenue, leading to a compression of the operating margin.
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Net Profit Margin
eBay Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) | 2,530) | (1,016) | 7,266) | 1,725) | 46) | |
| Net revenues | 10,746) | 9,567) | 8,979) | 8,592) | 17,902) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 23.54% | -10.62% | 80.92% | 20.08% | 0.26% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
Net profit margin = 100 × Net income (loss) ÷ Net revenues
= 100 × 2,530 ÷ 10,746 = 23.54%
2 Click competitor name to see calculations.
The net profit margin demonstrates extreme volatility over the five-year period, characterized by non-linear fluctuations that suggest the influence of non-operating items rather than purely organic operational growth.
- Revenue Trends
- A substantial contraction in net revenues occurred between 2014 and 2015. Following this decline, revenues exhibited a steady and consistent year-over-year increase, growing from 8,592 million US dollars in 2015 to 10,746 million US dollars by 2018.
- Profit Margin Fluctuations
- Profitability experienced an aggressive ascent from a marginal 0.26% in 2014 to an exceptional peak of 80.92% in 2016. This peak was followed by a precipitous decline in 2017, where the net profit margin fell to -10.62%, indicating a significant net loss during that fiscal year.
- Financial Recovery
- The period concluded with a recovery in 2018, as the net profit margin returned to a positive 23.54%. This recovery coincided with the highest revenue figure of the observed period, suggesting a stabilization of earnings relative to top-line growth.
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Return on Equity (ROE)
eBay Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) | 2,530) | (1,016) | 7,266) | 1,725) | 46) | |
| Stockholders’ equity | 6,281) | 8,063) | 10,539) | 6,576) | 19,906) | |
| Profitability Ratio | ||||||
| ROE1 | 40.28% | -12.60% | 68.94% | 26.23% | 0.23% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 2,530 ÷ 6,281 = 40.28%
2 Click competitor name to see calculations.
The financial performance between 2014 and 2018 is characterized by significant volatility in net income and a consistent reduction in stockholders' equity, which together created erratic fluctuations in the return on equity (ROE).
- Net Income Performance
- Earnings experienced a sharp upward trajectory from 2014 to 2016, peaking at 7,266 million US dollars. This growth was followed by a substantial reversal in 2017, during which a net loss of 1,016 million US dollars was recorded, before returning to a positive position of 2,530 million US dollars in 2018.
- Stockholders' Equity Trends
- A pronounced downward trend in equity is observed, falling from 19,906 million US dollars in 2014 to 6,281 million US dollars by 2018. This consistent contraction of the equity base serves to magnify the return on equity, making the ratio more sensitive to annual fluctuations in net income.
- Return on Equity (ROE) Analysis
- The ROE exhibits extreme variance, starting at a negligible 0.23% in 2014 and escalating to a peak of 68.94% in 2016. The ratio shifted to a negative 12.60% in 2017, mirroring the net loss, and subsequently recovered to 40.28% in 2018. The elevated ROE levels observed in 2016 and 2018 are driven by the combination of positive net income and a significantly diminished equity denominator.
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Return on Assets (ROA)
eBay Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income (loss) | 2,530) | (1,016) | 7,266) | 1,725) | 46) | |
| Total assets | 22,819) | 25,981) | 23,847) | 17,785) | 45,132) | |
| Profitability Ratio | ||||||
| ROA1 | 11.09% | -3.91% | 30.47% | 9.70% | 0.10% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Amazon.com Inc. | — | — | — | — | — | |
| Home Depot Inc. | — | — | — | — | — | |
| Lowe’s Cos. Inc. | — | — | — | — | — | |
| TJX Cos. Inc. | — | — | — | — | — | |
Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).
1 2018 Calculation
ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 2,530 ÷ 22,819 = 11.09%
2 Click competitor name to see calculations.
The analysis of profitability between 2014 and 2018 reveals significant volatility in both net income generation and asset utilization, resulting in fluctuating efficiency levels.
- Return on Assets (ROA) Performance
- ROA experienced extreme variance over the five-year period. After starting at a marginal 0.10% in 2014, the ratio climbed sharply to 9.70% in 2015 and reached a peak of 30.47% in 2016. This upward trajectory was reversed in 2017, when ROA fell to -3.91%, before recovering to 11.09% in 2018.
- Net Income Trends
- Net income showed substantial growth from 2014 to 2016, increasing from 46 million to 7,266 million. A significant downturn occurred in 2017 with a net loss of 1,016 million, followed by a recovery to a profit of 2,530 million in 2018.
- Asset Base Fluctuations
- A major contraction in total assets was observed between 2014 and 2015, where the asset base decreased from 45,132 million to 17,785 million. Assets then trended slightly upward, peaking at 25,981 million in 2017, before declining to 22,819 million in 2018.
The surge in ROA observed in 2016 was the result of peak net income occurring simultaneously with a significantly reduced asset base compared to the 2014 levels. The negative ROA recorded in 2017 is directly correlated with the net loss sustained during that year, despite the asset base remaining relatively stable. By 2018, the return to a positive ROA of 11.09% indicates a restoration of profitability and improved efficiency in utilizing assets to generate earnings.
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