Stock Analysis on Net

Air Products & Chemicals Inc. (NYSE:APD)

This company has been moved to the archive! The financial data has not been updated since August 9, 2021.

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin 

Microsoft Excel

Two-Component Disaggregation of ROE

Air Products & Chemicals Inc., decomposition of ROE

Microsoft Excel
ROE = ROA × Financial Leverage
Sep 30, 2020 15.62% = 7.50% × 2.08
Sep 30, 2019 15.92% = 9.29% × 1.71
Sep 30, 2018 13.80% = 7.81% × 1.77
Sep 30, 2017 29.75% = 16.25% × 1.83
Sep 30, 2016 8.91% = 3.50% × 2.55
Sep 30, 2015 17.63% = 7.33% × 2.41

Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).


Return on Assets (ROA)
The Return on Assets displayed significant fluctuations over the period analyzed. It started at 7.33% in 2015, dropped considerably to 3.5% in 2016, and then sharply increased to a peak of 16.25% in 2017. After this peak, ROA decreased again to 7.81% in 2018, followed by a moderate increase to 9.29% in 2019, and then a slight decline to 7.5% in 2020. This pattern indicates volatility in the company's efficiency in utilizing its assets to generate profits, with notable recovery periods after downturns.
Financial Leverage
Financial leverage showed a general declining trend from 2015 to 2019, moving from 2.41 in 2015 to a low of 1.71 in 2019. This indicates a gradual reduction in the reliance on debt relative to equity over these years. However, in 2020, financial leverage rose again to 2.08, suggesting an increased use of debt in the capital structure during that year. Overall, leverage levels varied within a moderate range, with a tendency toward deleveraging until the most recent year analyzed.
Return on Equity (ROE)
Return on Equity closely mirrored the patterns observed in ROA, but with greater amplitude. It started at 17.63% in 2015, almost halved to 8.91% in 2016, and then surged to 29.75% in 2017, the highest value observed in the series. Following this peak, ROE declined to 13.8% in 2018 and showed gradual improvement to 15.92% in 2019, maintaining a similar level of 15.62% in 2020. The fluctuations in ROE suggest varying profitability for shareholders influenced by both operational efficiency and changes in financial leverage.

Three-Component Disaggregation of ROE

Air Products & Chemicals Inc., decomposition of ROE

Microsoft Excel
ROE = Net Profit Margin × Asset Turnover × Financial Leverage
Sep 30, 2020 15.62% = 21.30% × 0.35 × 2.08
Sep 30, 2019 15.92% = 19.73% × 0.47 × 1.71
Sep 30, 2018 13.80% = 16.77% × 0.47 × 1.77
Sep 30, 2017 29.75% = 36.65% × 0.44 × 1.83
Sep 30, 2016 8.91% = 6.63% × 0.53 × 2.55
Sep 30, 2015 17.63% = 12.91% × 0.57 × 2.41

Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).


Net Profit Margin
The net profit margin exhibited considerable fluctuation over the analyzed period. It started at 12.91% in 2015 and declined significantly to 6.63% in 2016. In 2017, there was a sharp increase to 36.65%, which represents a peak during the period. This was followed by a decrease to 16.77% in 2018, before improving to 19.73% in 2019 and further to 21.3% in 2020. Overall, the margin showed volatility but ended higher than the initial value.
Asset Turnover
The asset turnover ratio demonstrated a generally declining trend throughout the period. Beginning at 0.57 in 2015, it decreased to 0.53 in 2016 and then further down to 0.44 in 2017. A slight recovery to 0.47 was observed in both 2018 and 2019, but the ratio fell again to 0.35 in 2020. This pattern suggests diminishing efficiency in using assets to generate sales over time.
Financial Leverage
Financial leverage showed variability with an initial increase from 2.41 in 2015 to 2.55 in 2016, indicating a higher reliance on debt or liabilities in the capital structure. From 2017 to 2019, leverage decreased steadily, reaching a low of 1.71 in 2019, suggesting a reduction in financial risk or debt levels. In 2020, leverage rose again to 2.08, implying a renewed increase in debt relative to equity.
Return on Equity (ROE)
ROE followed a pattern generally mirroring net profit margin trends. It started at 17.63% in 2015 and fell to 8.91% in 2016. In 2017, ROE markedly increased to 29.75%, reflecting strong profitability. Subsequently, it declined to 13.8% in 2018, then rose modestly to 15.92% in 2019 and slightly decreased to 15.62% in 2020. The data indicates periods of strong returns followed by moderation, with 2020 levels still below the peak in 2017.

Five-Component Disaggregation of ROE

Air Products & Chemicals Inc., decomposition of ROE

Microsoft Excel
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage
Sep 30, 2020 15.62% = 0.80 × 0.96 × 27.94% × 0.35 × 2.08
Sep 30, 2019 15.92% = 0.79 × 0.94 × 26.65% × 0.47 × 1.71
Sep 30, 2018 13.80% = 0.74 × 0.94 × 24.10% × 0.47 × 1.77
Sep 30, 2017 29.75% = 0.92 × 0.96 × 41.31% × 0.44 × 1.83
Sep 30, 2016 8.91% = 0.52 × 0.91 × 14.00% × 0.53 × 2.55
Sep 30, 2015 17.63% = 0.75 × 0.94 × 18.16% × 0.57 × 2.41

Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).


Tax Burden
The tax burden ratio exhibited significant fluctuation over the period. Starting at 0.75 in 2015, it dropped sharply to 0.52 in 2016, then surged to 0.92 in 2017. Subsequently, the ratio stabilized in the range of 0.74 to 0.8 from 2018 to 2020.
Interest Burden
The interest burden ratio remained relatively stable throughout the years, varying slightly between 0.91 and 0.96. This indicates consistent management of interest expenses relative to earnings before interest and taxes.
EBIT Margin
The EBIT margin showed considerable volatility. It started at 18.16% in 2015, decreased to 14% in 2016, then experienced a sharp increase to 41.31% in 2017. After 2017, the margin declined but remained relatively strong, stabilizing between 24.1% and 27.94% through 2020.
Asset Turnover
The asset turnover ratio demonstrated a general downward trend. It decreased from 0.57 in 2015 to 0.35 in 2020, with some minor fluctuations in the intermediate years. This suggests a decline in the efficiency of asset utilization over the period.
Financial Leverage
Financial leverage varied, initially increasing from 2.41 in 2015 to 2.55 in 2016, then declining notably to a low of 1.71 in 2019. A subsequent rise to 2.08 in 2020 indicates a partial increase in the use of debt relative to equity towards the end of the period.
Return on Equity (ROE)
The ROE exhibited marked variability. It decreased from 17.63% in 2015 to a low of 8.91% in 2016. A sharp increase to 29.75% followed in 2017, after which ROE declined again but remained moderately stable between 13.8% and 15.92% through to 2020. The fluctuations in ROE correspond with changes in tax burden, EBIT margin, and financial leverage.

Two-Component Disaggregation of ROA

Air Products & Chemicals Inc., decomposition of ROA

Microsoft Excel
ROA = Net Profit Margin × Asset Turnover
Sep 30, 2020 7.50% = 21.30% × 0.35
Sep 30, 2019 9.29% = 19.73% × 0.47
Sep 30, 2018 7.81% = 16.77% × 0.47
Sep 30, 2017 16.25% = 36.65% × 0.44
Sep 30, 2016 3.50% = 6.63% × 0.53
Sep 30, 2015 7.33% = 12.91% × 0.57

Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).


Net Profit Margin
The net profit margin displays significant fluctuations over the observed period. Initially, it decreased from 12.91% in 2015 to 6.63% in 2016, followed by a sharp increase to 36.65% in 2017. Subsequently, it declined to 16.77% in 2018 but then showed a gradual rise, reaching 21.3% by 2020. This indicates periods of considerable profitability volatility, with a notable peak in 2017 and generally improving margins after 2018.
Asset Turnover
Asset turnover shows a declining trend throughout the period under review. Starting at 0.57 in 2015, it decreased to 0.53 in 2016 and further dropped to 0.44 in 2017. After a slight increase to 0.47 in 2018 and 2019, it fell again to 0.35 in 2020. This pattern suggests decreasing efficiency in the use of assets to generate sales over time, especially marked by the reduction in 2020 to its lowest point in the series.
Return on Assets (ROA)
Return on assets mirrors the trends observed in other profitability indicators but with some variability. Starting at 7.33% in 2015, it declined to 3.5% in 2016, then increased sharply to 16.25% in 2017. Following this peak, ROA decreased to 7.81% in 2018, then showed a slight improvement to 9.29% in 2019 before falling again to 7.5% in 2020. These fluctuations reflect changes in overall asset profitability, revealing a period of strong performance in 2017, followed by moderate returns in subsequent years.

Four-Component Disaggregation of ROA

Air Products & Chemicals Inc., decomposition of ROA

Microsoft Excel
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Sep 30, 2020 7.50% = 0.80 × 0.96 × 27.94% × 0.35
Sep 30, 2019 9.29% = 0.79 × 0.94 × 26.65% × 0.47
Sep 30, 2018 7.81% = 0.74 × 0.94 × 24.10% × 0.47
Sep 30, 2017 16.25% = 0.92 × 0.96 × 41.31% × 0.44
Sep 30, 2016 3.50% = 0.52 × 0.91 × 14.00% × 0.53
Sep 30, 2015 7.33% = 0.75 × 0.94 × 18.16% × 0.57

Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).


Tax Burden
The tax burden ratio exhibited fluctuations over the analyzed periods. It began at 0.75 in 2015, decreased significantly to 0.52 in 2016, then sharply increased to 0.92 in 2017. Following this peak, it declined moderately to 0.74 in 2018 before stabilizing around 0.79 and 0.8 in 2019 and 2020, respectively. This pattern indicates variability in the effective tax rate affecting net profitability.
Interest Burden
The interest burden ratio remained relatively stable and high throughout the period, ranging narrowly between 0.91 and 0.96. This consistency suggests that interest expenses had a steady and moderate impact on earnings before taxes, with slight improvements in the later years.
EBIT Margin
The EBIT margin displayed notable volatility. Starting at 18.16% in 2015, there was a considerable drop to 14% in 2016, followed by an extraordinary spike to 41.31% in 2017. After this, the margin decreased to a more moderate range, stabilizing between 24.1% and 27.94% from 2018 through 2020. This pattern may reflect significant operational changes or one-time events influencing earnings before interest and taxes during these years.
Asset Turnover
Asset turnover showed a declining trend over the years. Beginning at 0.57 in 2015, it gradually decreased to 0.53 in 2016, and further down to 0.44 in 2017. It experienced a slight recovery to 0.47 in 2018 and 2019, but then dropped substantially to 0.35 in 2020. This decline signifies a reduction in the efficiency of asset utilization to generate sales.
Return on Assets (ROA)
Return on assets followed a fluctuating course. From 7.33% in 2015, it dropped sharply to 3.5% in 2016, surged to 16.25% in 2017, then fell again to 7.81% in 2018. The ratio slightly increased to 9.29% in 2019 before declining to 7.5% in 2020. These movements demonstrate variability in profitability relative to the company’s asset base, potentially linked to the volatility observed in EBIT margin and asset turnover.

Disaggregation of Net Profit Margin

Air Products & Chemicals Inc., decomposition of net profit margin ratio

Microsoft Excel
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Sep 30, 2020 21.30% = 0.80 × 0.96 × 27.94%
Sep 30, 2019 19.73% = 0.79 × 0.94 × 26.65%
Sep 30, 2018 16.77% = 0.74 × 0.94 × 24.10%
Sep 30, 2017 36.65% = 0.92 × 0.96 × 41.31%
Sep 30, 2016 6.63% = 0.52 × 0.91 × 14.00%
Sep 30, 2015 12.91% = 0.75 × 0.94 × 18.16%

Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).


Tax Burden
The tax burden ratio exhibited notable fluctuations over the six-year period. Starting at 0.75 in 2015, it sharply declined to 0.52 in 2016, indicating a reduced tax impact that year. It then rebounded significantly to 0.92 in 2017, followed by a moderate decrease to 0.74 in 2018. In the last two years, the ratio showed a slight upward trend, stabilizing around 0.79 to 0.80 in 2019 and 2020. This variability suggests changes in the company's effective tax rate or tax strategies during this timeframe.
Interest Burden
The interest burden ratio remained relatively stable throughout the period, ranging between 0.91 and 0.96. It started at 0.94 in 2015, dipped slightly to 0.91 in 2016, then generally increased back to 0.96 by 2020. The narrow range indicates consistent interest expenses relative to earnings before interest and taxes, reflecting stable financial leverage or interest cost management.
EBIT Margin
The EBIT margin displayed significant volatility, with a generally upward trend after 2016. Beginning at 18.16% in 2015, it dropped to a low of 14% in 2016. A pronounced surge to 41.31% occurred in 2017, followed by a decline to 24.1% in 2018. Thereafter, the margin increased moderately to 26.65% in 2019 and further to 27.94% in 2020. These fluctuations could be attributed to operational performance changes, cost fluctuations, or revenue variability in the period analyzed.
Net Profit Margin
The net profit margin experienced considerable fluctuation, mirroring some patterns seen in the EBIT margin but with more pronounced variation. It declined from 12.91% in 2015 to a low of 6.63% in 2016. In 2017, the margin dramatically increased to 36.65%, considerably higher than surrounding years, then decreased to 16.77% in 2018. The margin recovered somewhat in subsequent years, reaching 19.73% in 2019 and 21.3% in 2020. This pattern suggests variable profitability influenced by both operational efficiency and other factors such as tax and interest impacts amplified in certain years.