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
3M Co., profitability ratios
Based on: 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), 10-K (reporting date: 2017-12-31).
The profitability metrics for the period between 2017 and 2021 indicate a general contraction in operational efficiency, contrasted by a relative stability in net bottom-line margins. While top-line profitability ratios faced downward pressure, the ability to convert revenue into net income remained consistent.
- Profitability Margins
- A downward trend is observed in the gross profit margin, which declined from 49.46% in 2017 to 46.84% in 2021. This compression is mirrored in the operating profit margin, which fell from 24.70% in 2017 to 20.84% in 2021, reaching a period low of 19.21% in 2019. Despite these operational declines, the net profit margin exhibited resilience, increasing from 15.35% in 2017 to 16.75% in 2021, suggesting that non-operating factors or cost management at the net level mitigated the erosion of operating margins.
- Return Metrics
- Return on Equity (ROE) showed significant volatility, peaking at 54.60% in 2018 before entering a steady decline to 39.35% by 2021. This indicates a reduction in the efficiency of generating profits from shareholders' equity over the latter half of the period. Return on Assets (ROA) followed a similar fluctuating pattern; after a decline to 10.23% in 2019, it recovered to 12.58% by 2021, ending the period near its 2017 level of 12.79%.
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Gross Profit Margin
3M Co., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross profit | 16,560) | 15,579) | 15,000) | 16,083) | 15,656) | |
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 46.84% | 48.41% | 46.68% | 49.09% | 49.46% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Boeing Co. | 4.84% | — | — | — | — | |
| Caterpillar Inc. | 26.30% | — | — | — | — | |
| Eaton Corp. plc | 32.28% | — | — | — | — | |
| GE Aerospace | 24.19% | — | — | — | — | |
| Honeywell International Inc. | 35.85% | — | — | — | — | |
| Lockheed Martin Corp. | 13.52% | — | — | — | — | |
| RTX Corp. | 19.40% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Gross profit margin = 100 × Gross profit ÷ Net sales
= 100 × 16,560 ÷ 35,355 = 46.84%
2 Click competitor name to see calculations.
The gross profit margin exhibited volatility between 2017 and 2021, characterized by a general lack of a linear trend and fluctuations between a peak of 49.46% and a trough of 46.68%. Although absolute gross profit reached its highest point in 2021, the efficiency of converting net sales into gross profit declined toward the end of the analyzed period.
- Net Sales and Gross Profit Volume
- Net sales remained relatively stable from 2017 to 2020, hovering between 31.6 billion and 32.7 billion US dollars, before experiencing a significant increase to 35.3 billion US dollars in 2021. Gross profit followed a similar trajectory, showing a dip in 2019 to 15 billion US dollars followed by a steady recovery to 16.5 billion US dollars by 2021.
- Gross Profit Margin Fluctuations
- The gross profit margin saw a gradual decline from 49.46% in 2017 to 46.68% in 2019. A partial recovery occurred in 2020, where the margin rose to 48.41%, suggesting an improvement in cost management or pricing power during that fiscal year.
- Analysis of the 2021 Fiscal Year
- A divergence is observed in 2021; while net sales and gross profit both reached five-year highs, the gross profit margin decreased to 46.84%. This indicates that the growth in net sales was accompanied by a disproportionately larger increase in the cost of goods sold, leading to a compression of the margin despite the increase in absolute profitability.
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Operating Profit Margin
3M Co., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | 7,369) | 7,161) | 6,174) | 7,207) | 7,820) | |
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 20.84% | 22.25% | 19.21% | 22.00% | 24.70% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Boeing Co. | -4.66% | — | — | — | — | |
| Caterpillar Inc. | 14.27% | — | — | — | — | |
| Eaton Corp. plc | 15.69% | — | — | — | — | |
| GE Aerospace | 8.58% | — | — | — | — | |
| Honeywell International Inc. | 18.03% | — | — | — | — | |
| Lockheed Martin Corp. | 13.61% | — | — | — | — | |
| RTX Corp. | 7.70% | — | — | — | — | |
| Operating Profit Margin, Sector | ||||||
| Capital Goods | 9.11% | — | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Industrials | 9.24% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Operating profit margin = 100 × Operating income ÷ Net sales
= 100 × 7,369 ÷ 35,355 = 20.84%
2 Click competitor name to see calculations.
An analysis of operational profitability from 2017 to 2021 reveals a period of volatility characterized by fluctuating margins despite a general upward trajectory in net sales.
- Operating Profit Margin Trends
- A consistent downward trend was observed between 2017 and 2019, with the operating profit margin contracting from 24.70% to a period low of 19.21%. A recovery occurred in 2020, with the margin rising to 22.25%, before it receded again to 20.84% in 2021.
- Revenue and Sales Performance
- Net sales demonstrated overall growth over the five-year period, rising from 31,657 million USD in 2017 to 35,355 million USD by 2021. The most significant increase occurred between 2020 and 2021, indicating a substantial expansion in top-line revenue.
- Operating Income Correlation
- Operating income did not move in tandem with net sales. Income decreased from 7,820 million USD in 2017 to 6,174 million USD in 2019. While income recovered to 7,369 million USD by 2021, this figure remained below the 2017 level despite the significantly higher sales volume recorded in 2021.
The divergence between increasing net sales and the fluctuating operating profit margin suggests that operating expenses grew at a rate that occasionally outpaced revenue gains. This is most evident in 2021, where the highest recorded net sales coincided with a decrease in the operating profit margin relative to the prior year.
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Net Profit Margin
3M Co., net profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to 3M | 5,921) | 5,384) | 4,570) | 5,349) | 4,858) | |
| Net sales | 35,355) | 32,184) | 32,136) | 32,765) | 31,657) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 16.75% | 16.73% | 14.22% | 16.33% | 15.35% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Boeing Co. | -6.75% | — | — | — | — | |
| Caterpillar Inc. | 13.47% | — | — | — | — | |
| Eaton Corp. plc | 10.92% | — | — | — | — | |
| GE Aerospace | -9.17% | — | — | — | — | |
| Honeywell International Inc. | 16.11% | — | — | — | — | |
| Lockheed Martin Corp. | 9.42% | — | — | — | — | |
| RTX Corp. | 6.00% | — | — | — | — | |
| Net Profit Margin, Sector | ||||||
| Capital Goods | 3.71% | — | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Industrials | 5.85% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
Net profit margin = 100 × Net income attributable to 3M ÷ Net sales
= 100 × 5,921 ÷ 35,355 = 16.75%
2 Click competitor name to see calculations.
The financial performance from 2017 to 2021 exhibits a general trend of growth in both top-line revenue and bottom-line profitability. While a temporary contraction occurred in 2019, the subsequent years demonstrate a strong recovery, culminating in peak figures across all measured metrics by the end of the period.
- Net Profit Margin Trends
- The net profit margin experienced fluctuation over the five-year period, starting at 15.35% in 2017 and rising to 16.33% in 2018. A notable decline was recorded in 2019, with the margin falling to a period low of 14.22%. This was followed by a sharp recovery in 2020 to 16.73%, remaining relatively stable at 16.75% in 2021.
- Net Sales Trajectory
- Net sales showed stability between 2017 and 2020, fluctuating within a narrow range between 31,657 million and 32,765 million. A significant upward shift occurred in 2021, where sales increased to 35,355 million, marking the highest revenue level within the analyzed timeframe.
- Net Income Analysis
- Net income attributable to the company mirrored the movement of the profit margin, decreasing to 4,570 million in 2019 before ascending to 5,384 million in 2020 and 5,921 million in 2021. The simultaneous increase in both net sales and net profit margin in 2021 suggests an improvement in operational efficiency and a successful scaling of profitability.
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Return on Equity (ROE)
3M Co., ROE calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to 3M | 5,921) | 5,384) | 4,570) | 5,349) | 4,858) | |
| Total 3M Company shareholders’ equity | 15,046) | 12,867) | 10,063) | 9,796) | 11,563) | |
| Profitability Ratio | ||||||
| ROE1 | 39.35% | 41.84% | 45.41% | 54.60% | 42.01% | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 39.37% | — | — | — | — | |
| Eaton Corp. plc | 13.06% | — | — | — | — | |
| GE Aerospace | -16.17% | — | — | — | — | |
| Honeywell International Inc. | 29.85% | — | — | — | — | |
| Lockheed Martin Corp. | 57.62% | — | — | — | — | |
| RTX Corp. | 5.29% | — | — | — | — | |
| ROE, Sector | ||||||
| Capital Goods | 8.48% | — | — | — | — | |
| ROE, Industry | ||||||
| Industrials | 15.38% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
ROE = 100 × Net income attributable to 3M ÷ Total 3M Company shareholders’ equity
= 100 × 5,921 ÷ 15,046 = 39.35%
2 Click competitor name to see calculations.
The financial performance from 2017 to 2021 demonstrates a divergent trend between absolute profitability and the efficiency of equity utilization. While net income reached its highest point by the end of the period, the Return on Equity (ROE) exhibited a consistent decline following a peak in 2018.
- Net Income Trends
- Net income attributable to the company showed moderate volatility between 2017 and 2019, reaching a low of $4,570 million in 2019. Following this trough, a steady growth trajectory is observed, with net income rising to $5,384 million in 2020 and peaking at $5,921 million by December 31, 2021.
- Shareholders' Equity Evolution
- Total shareholders' equity decreased from $11,563 million in 2017 to $9,796 million in 2018. After remaining relatively stable in 2019, the equity base expanded significantly over the subsequent two years, increasing to $12,867 million in 2020 and reaching $15,046 million by the end of 2021.
- Return on Equity (ROE) Dynamics
- A peak ROE of 54.60% was recorded in 2018, resulting from the confluence of increased net income and a reduced equity base. From 2019 onward, a persistent downward trend is evident, with the ratio falling to 45.41% in 2019, 41.84% in 2020, and 39.35% in 2021. This decline indicates that the growth in the capital base expanded at a faster rate than the growth in net earnings, thereby reducing the overall return generated on shareholders' investments.
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Return on Assets (ROA)
3M Co., ROA calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to 3M | 5,921) | 5,384) | 4,570) | 5,349) | 4,858) | |
| Total assets | 47,072) | 47,344) | 44,659) | 36,500) | 37,987) | |
| Profitability Ratio | ||||||
| ROA1 | 12.58% | 11.37% | 10.23% | 14.65% | 12.79% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Boeing Co. | -3.03% | — | — | — | — | |
| Caterpillar Inc. | 7.84% | — | — | — | — | |
| Eaton Corp. plc | 6.30% | — | — | — | — | |
| GE Aerospace | -3.28% | — | — | — | — | |
| Honeywell International Inc. | 8.60% | — | — | — | — | |
| Lockheed Martin Corp. | 12.41% | — | — | — | — | |
| RTX Corp. | 2.39% | — | — | — | — | |
| ROA, Sector | ||||||
| Capital Goods | 1.86% | — | — | — | — | |
| ROA, Industry | ||||||
| Industrials | 3.40% | — | — | — | — | |
Based on: 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), 10-K (reporting date: 2017-12-31).
1 2021 Calculation
ROA = 100 × Net income attributable to 3M ÷ Total assets
= 100 × 5,921 ÷ 47,072 = 12.58%
2 Click competitor name to see calculations.
The return on assets (ROA) between 2017 and 2021 demonstrates a non-linear trend, marked by an initial increase, a significant correction, and a subsequent steady recovery. This fluctuation is the result of divergent movements in net income and the total asset base during this five-year period.
- Net Income Trends
- Net income attributable to the company grew from 4,858 million in 2017 to 5,921 million by 2021. Despite an overall upward trajectory, a notable decrease to 4,570 million occurred in 2019 before earnings recovered and surpassed previous peaks in the subsequent two years.
- Asset Base Evolution
- The total asset base expanded from 37,987 million in 2017 to 47,072 million in 2021. The most significant expansion took place between 2018 and 2019, during which assets increased from 36,500 million to 44,659 million.
- ROA Performance and Drivers
- The ROA peaked in 2018 at 14.65%, driven by a combination of increased net income and a reduced asset base. A sharp decline to 10.23% was recorded in 2019, resulting from the simultaneous occurrence of lower net income and a substantial increase in total assets. Following this trough, a recovery trend is observed, with the ratio improving to 11.37% in 2020 and reaching 12.58% in 2021, suggesting an increase in the efficiency of asset utilization to generate profit.
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