Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Aggregate Accruals
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Profitability Ratios (Summary)
Baxter International Inc., profitability ratios
Based on: 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), 10-K (reporting date: 2011-12-31).
- Gross Profit Margin
- The gross profit margin exhibited a gradual decline over the observed period, starting at 50.72% in 2011 and slightly increasing to 51.45% in 2012. From 2013 onward, there is a steady decrease, reaching 41.59% by the end of 2015. This trend suggests a consistent reduction in the proportion of revenue remaining after accounting for the cost of goods sold, indicating potential pressure on production costs or pricing strategies.
- Operating Profit Margin
- The operating profit margin shows a notable downward trend, beginning at 21.2% in 2011 and decreasing progressively each year to a low of 4.5% in 2015. The decline is particularly steep between 2014 and 2015. This indicates diminishing efficiency in core operations or increasing operating expenses relative to sales, impacting the company’s profitability at the operational level.
- Net Profit Margin
- Net profit margin experienced fluctuations but follows an overall declining pattern. Starting at 16.01% in 2011, it slightly increased to 16.39% in 2012, then dropped to 13.19% in 2013, rose again to 14.98% in 2014, and finally declined substantially to 9.71% in 2015. This volatility could be indicative of changes in non-operating incomes and expenses, taxation, or financial management effects impacting the bottom line beyond operating results.
- Return on Equity (ROE)
- The return on equity showed a decreasing trend with some variability. It started very strong at 33.77% in 2011 and remained relatively stable in 2012 at 33.53%. However, there was a significant decline in 2013 to 23.77%, followed by a partial recovery to 30.75% in 2014, and a sharp fall to 10.94% in 2015. This indicates a reduction in the company’s ability to generate profits from shareholders’ equity, especially in the later years.
- Return on Assets (ROA)
- Return on assets declined noticeably from 11.66% in 2011 to 4.62% in 2015, with a temporary dip to 7.78% in 2013 and partial recovery to 9.63% in 2014. This trend reflects a decreasing efficiency in using the company’s assets to generate earnings, implying greater asset base or lower net income efficiency over time.
Return on Sales
Return on Investment
Gross Profit Margin
Baxter International Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross margin | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Gross profit margin = 100 × Gross margin ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Sales
- Net sales displayed an increasing trend from 2011 to 2014, rising from 13,893 million USD to 16,671 million USD, representing a steady growth over these four years. However, in 2015, net sales experienced a significant decline to 9,968 million USD, reversing the previous upward trend.
- Gross Margin
- The gross margin followed a similar pattern as net sales, showing growth from 7,046 million USD in 2011 to 8,157 million USD in 2014. In 2015, there was a marked decrease to 4,146 million USD, indicating a substantial reduction in gross earnings relative to previous years.
- Gross Profit Margin Percentage
- The gross profit margin percentage exhibited a mostly declining trend over the period. It increased slightly from 50.72% in 2011 to 51.45% in 2012 but then decreased consistently from 2013 onwards: 49.77% in 2013, 48.93% in 2014, and a significant drop to 41.59% in 2015. This indicates that despite some growth in absolute gross margin values until 2014, profitability relative to sales was weakening, particularly with the sharp decline in 2015.
- Overall Analysis
- From 2011 to 2014, the company experienced steady growth in both net sales and gross margin, although the gross profit margin percentage showed an early peak and then gradual decline, suggesting increasing cost pressures or changes in product mix. The year 2015 marks a notable downturn across all metrics, with both net sales and gross margin decreasing significantly, accompanied by a sharp contraction in gross profit margin percentage. This shift points to potential challenges such as decreased demand, pricing pressure, or increased costs that negatively impacted profitability.
Operating Profit Margin
Baxter International Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Operating profit margin = 100 × Operating income ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Operating Income
- The operating income showed a declining trend from 2011 to 2014, decreasing from 2,946 million US dollars in 2011 to 2,668 million US dollars in 2013, with a slight recovery in 2014 to 2,707 million US dollars. However, in 2015, there was a significant drop to 449 million US dollars, indicating a substantial reduction in profitability from core operations.
- Net Sales
- Net sales initially increased steadily over the first four years, rising from 13,893 million US dollars in 2011 to 16,671 million US dollars in 2014. In 2015, net sales decreased sharply to 9,968 million US dollars, reversing the previous upward trend and suggesting a major contraction in revenue.
- Operating Profit Margin
- The operating profit margin exhibited a consistent downward trajectory throughout the period, starting at 21.2% in 2011 and declining each year to reach 16.24% in 2014. In 2015, the margin dropped sharply to 4.5%, indicating a marked deterioration in profitability relative to sales.
Net Profit Margin
Baxter International Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Baxter | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
Net profit margin = 100 × Net income attributable to Baxter ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Attributable to Baxter
- The net income demonstrated fluctuations over the observed five-year period. Starting at 2,224 million USD in 2011, it increased to 2,326 million USD in 2012. However, in the subsequent year, a decline occurred reaching 2,012 million USD in 2013. The income rebounded significantly in 2014 to 2,497 million USD but then experienced a steep drop to 968 million USD by the end of 2015.
- Net Sales
- Net sales showed an overall upward trend from 13,893 million USD in 2011 to a peak of 16,671 million USD in 2014. In 2015, there was a pronounced decline to 9,968 million USD, marking a substantial decrease relative to the previous years.
- Net Profit Margin
- The net profit margin remained relatively stable from 2011 through 2012, around 16%, but decreased notably in 2013 to 13.19%. It recovered somewhat in 2014 to 14.98% but then declined further to 9.71% in 2015. This reduction in profitability ratio aligns with the drop in both net income and net sales for 2015.
Return on Equity (ROE)
Baxter International Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Baxter | ||||||
| Total Baxter shareholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
ROE = 100 × Net income attributable to Baxter ÷ Total Baxter shareholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Attributable to Baxter
- The net income displayed a fluctuating trend over the five-year period. Starting at 2,224 million US dollars in 2011, it increased to a peak of 2,497 million in 2014 before experiencing a significant decline to 968 million in 2015. This marks a substantial decrease of approximately 61.2% from the previous year, indicating potential challenges faced by the company in 2015.
- Total Baxter Shareholders’ Equity
- Shareholders' equity showed a generally positive trend with consistent growth throughout most of the period. It rose from 6,585 million US dollars in 2011 to 8,846 million in 2015. Despite a slight dip in 2014 compared to 2013, the overall trajectory suggests an increasing equity base, reflecting possibly retained earnings and capital injections over time.
- Return on Equity (ROE)
- The ROE mirrored the fluctuations in net income but showed an overall declining trend. It started high at 33.77% in 2011, remained relatively steady in 2012, then declined sharply to 23.77% in 2013. It recovered somewhat to 30.75% in 2014 but dropped markedly to 10.94% in 2015. This significant decline in 2015 indicates reduced profitability relative to shareholder equity, which aligns with the reduced net income in the same year.
- Summary
- Overall, the data reveal an initial period of robust profitability and equity growth, followed by a notable downturn in 2015. The sharp decline in net income and ROE in 2015 contrasts with continued growth in shareholders' equity, suggesting potential operational or market challenges impacting profitability despite a strong equity base.
Return on Assets (ROA)
Baxter International Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Baxter | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Abbott Laboratories | ||||||
| CVS Health Corp. | ||||||
| Elevance Health Inc. | ||||||
| Intuitive Surgical Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group Inc. | ||||||
Based on: 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), 10-K (reporting date: 2011-12-31).
1 2015 Calculation
ROA = 100 × Net income attributable to Baxter ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Attributable to Baxter
- The net income showed an overall fluctuation over the five-year period. Starting at $2,224 million in 2011, it increased slightly to $2,326 million in 2012, then declined to $2,012 million in 2013. A recovery occurred in 2014 with net income rising to $2,497 million. However, a significant drop was observed in 2015, where net income fell sharply to $968 million, less than half of the previous year's figure.
- Total Assets
- Total assets demonstrated an upward trend from 2011 to 2014, beginning at $19,073 million and reaching a peak of $25,917 million in 2014. In 2015, total assets decreased to $20,975 million, reflecting a notable contraction after several years of growth.
- Return on Assets (ROA)
- ROA mirrored the fluctuations in net income and asset base, starting relatively high at 11.66% in 2011 and maintaining a similar level of 11.41% in 2012. Thereafter, it declined to 7.78% in 2013, with a modest recovery to 9.63% in 2014. The year 2015 saw a significant drop in ROA to 4.62%, indicating reduced efficiency in utilizing assets to generate profit.