DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Quarterly Data
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
Two-Component Disaggregation of ROE
Altria Group Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The financial data reveals several notable trends in profitability and leverage over the analyzed periods.
- Return on Assets (ROA)
- Initially, the ROA exhibited a negative trend, reaching -2.62% in December 2019 and fluctuating slightly in negative territory into mid-2020. Starting from the third quarter of 2020, the ROA turned positive and demonstrated a consistent upward trajectory. There was a significant improvement in ROA from 1.57% in September 2020 to a peak of 30.1% by June 2024. This trend indicates increasing efficiency in asset utilization to generate profits over the periods examined.
- Financial Leverage
- The financial leverage ratio showed an increasing pattern initially, rising from 4.21 in March 2019 to a high of 16.74 in March 2021. After this peak, the data for leverage is missing, which limits analysis for the later periods. Up to the available point, the rising pattern suggests an increasing reliance on debt or other liabilities relative to equity, which may correlate with observed fluctuations in profitability metrics.
- Return on Equity (ROE)
- ROE exhibited volatile behavior in the early periods, starting from negative values in late 2019 and early 2020, with significant losses particularly marked by -20.78% in December 2019. A strong positive rebound occurred from the fourth quarter of 2020, reaching exceptionally high figures of 157.34% in March 2021. Post-March 2021 data is unavailable, limiting the assessment of recent ROE trends. The earlier variability signals volatility in equity returns, potentially connected to the changing leverage and asset performance.
Overall, the data suggests a turnaround beginning in late 2020, with marked improvements in profitability ratios alongside increased leverage. The consistent rise in ROA highlights growing operational effectiveness, while the sharp changes in ROE and leverage underline a period of financial restructuring or strategic shifts. The incomplete data in later periods means conclusions should be drawn with caution regarding recent financial conditions.
Three-Component Disaggregation of ROE
Altria Group Inc., decomposition of ROE (quarterly data)
Based on: 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
- Net Profit Margin
- The net profit margin shows significant volatility over the reported periods. Initially, the margin was negative at the end of 2019, indicating losses. This negative trend persisted through the first half of 2020 with margins around -3% to -5%. However, from the latter half of 2020, there was a marked turnaround with margins turning positive and gradually increasing. The upward trend accelerated from early 2021, stabilizing in the range of approximately 10% to 22% by the end of 2022. The margin continued improving into 2023 and early 2024, reaching levels above 40%, which represents a substantial enhancement in profitability.
- Asset Turnover
- Asset turnover ratios were unavailable for early periods but began to appear in 2019 with moderate values around 0.49 to 0.55. Through 2020 and 2021, these ratios generally increased, peaking around 0.66 in late 2021. The ratio then fluctuated moderately between 0.63 and 0.74 through 2022 and into 2024, indicating relatively consistent efficiency in using assets to generate revenue. This reflects an overall stable to improving trend in asset utilization.
- Financial Leverage
- Financial leverage increased markedly from early 2019 to the end of 2020, escalating from approximately 4.21 to over 16.7. This sharp rise suggests a significant increase in the use of debt or other liabilities to finance the company's assets during this period. However, the lack of data beyond 2020 makes it difficult to evaluate more recent leverage trends or any deleveraging efforts.
- Return on Equity (ROE)
- ROE showed extreme fluctuation especially between 2019 and 2021. The company experienced deeply negative returns in late 2019 and early 2020, with ROE values below -20%, indicating substantial losses relative to equity. This was followed by a dramatic and rapid recovery starting late 2020, with ROE climbing to extraordinarily high values exceeding 100% in early 2021. Such elevated returns suggest exceptional profitability or possibly financial leverage effects. However, data for subsequent periods are missing, limiting the assessment of sustainability of this high performance.
Two-Component Disaggregation of ROA
Altria Group Inc., decomposition of ROA (quarterly data)
Based on: 10-Q (reporting date: 2024-09-30), 10-Q (reporting date: 2024-06-30), 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31).
The analysis of the quarterly financial data reveals a clear upward trend in profitability and efficiency metrics over the observed periods.
- Net Profit Margin
- The net profit margin shows a transition from negative figures in early 2020 to consistently positive and increasing margins thereafter. Initially, the margin was negative, reaching its lowest point around the first half of 2020 with values near -5%, but it turned positive by the end of 2020. From 2021 onward, the margin steadily improved, peaking in early 2024 at approximately 42.82%. This indicates a significant enhancement in the company's ability to convert revenue into profit over time.
- Asset Turnover
- Asset turnover ratios demonstrate moderate improvement and relative stability. Starting around 0.51 in early 2020, the ratio gradually increased and fluctuated modestly between approximately 0.49 and 0.74 throughout the periods. The highest values were observed in late 2022 and early 2024, suggesting improved efficiency in using assets to generate sales, though the overall variation remains within a moderate range.
- Return on Assets (ROA)
- Return on assets parallels the trends observed in net profit margin and asset turnover, moving from negative values in early 2020 to robust positive returns in recent quarters. Initially below zero (approximately -2.62%), ROA rose steadily post-2020, with some minor fluctuations, reaching over 30% by the first half of 2024. This strong upward trend reflects enhanced overall profitability relative to the company's asset base.
In summary, the company has demonstrated marked improvement in profitability and asset utilization since early 2020. The transition from losses to strong profit margins and returns points to successful operational or strategic initiatives. Asset turnover has improved moderately, supporting the gains in ROA. The overall financial performance reflects a positive momentum in the company's efficiency and profitability metrics over the analyzed period.