Stock Analysis on Net
Stock Analysis on Net

Builders FirstSource Inc. (NYSE:BLDR)

$22.49

This company has been moved to the archive! The financial data has not been updated since November 1, 2023.

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

Microsoft Excel

Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.

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Two-Component Disaggregation of ROE

Builders FirstSource Inc., decomposition of ROE

Microsoft Excel
ROE = ROA × Financial Leverage
Dec 31, 2022 = ×
Dec 31, 2021 = ×
Dec 31, 2020 = ×
Dec 31, 2019 = ×
Dec 31, 2018 = ×

Based on: 10-K (reporting date: 2022-12-31), 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).

Return on Assets (ROA)
The Return on Assets displayed a generally upward trend over the analyzed period. Starting at 7% in 2018, it experienced a slight decline to 6.83% in 2019, followed by a modest rise to 7.51% in 2020. Subsequently, there was a significant increase in 2021 to 16.1%, which further accelerated to 25.95% in 2022. This pattern indicates a strengthening efficiency in asset utilization to generate profits.
Financial Leverage
Financial leverage steadily decreased throughout the period. From a ratio of 4.92 in 2018, it declined to 3.94 in 2019, then continued downward to 3.62 in 2020. This downward trend became more pronounced in 2021 and 2022, reaching 2.23 and 2.14 respectively. The reduction in financial leverage suggests a movement toward a more conservative capital structure with potentially lower reliance on debt financing.
Return on Equity (ROE)
Return on Equity demonstrated variability but overall growth. It began at 34.41% in 2018, declined to 26.89% in 2019, and slightly improved to 27.2% in 2020. The upward momentum became more marked in the final two years, climbing to 35.93% in 2021 and surging to 55.4% in 2022. This increase signals enhanced profitability relative to shareholder equity, possibly driven by improved operational results and capital management.

Three-Component Disaggregation of ROE

Builders FirstSource Inc., decomposition of ROE

Microsoft Excel
ROE = Net Profit Margin × Asset Turnover × Financial Leverage
Dec 31, 2022 = × ×
Dec 31, 2021 = × ×
Dec 31, 2020 = × ×
Dec 31, 2019 = × ×
Dec 31, 2018 = × ×

Based on: 10-K (reporting date: 2022-12-31), 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).

Net Profit Margin
The net profit margin has exhibited a consistent upward trend over the five-year period. Starting at 2.66% in 2018, it gradually increased to 3.05% in 2019 and 3.66% in 2020. A more pronounced improvement occurred in 2021 and 2022, with margins rising to 8.67% and then to 12.1%, respectively. This reflects enhanced profitability and improved operational efficiency over time.
Asset Turnover
Asset turnover demonstrated a downward trend from 2.63 in 2018 to 1.86 in 2021, signaling a decreasing efficiency in utilizing assets to generate revenue during this period. However, there was a reversal in 2022, with the ratio increasing to 2.14, suggesting a recovery in asset usage efficiency in the most recent year.
Financial Leverage
Financial leverage steadily declined from a high of 4.92 in 2018 to 2.14 in 2022. This reduction indicates a significant decrease in the reliance on debt financing relative to equity. The decrease was particularly sharp from 2020 to 2021, with the ratio dropping from 3.62 to 2.23, and continued a slight decrease in 2022.
Return on Equity (ROE)
ROE experienced fluctuations, declining from a peak of 34.41% in 2018 to 26.89% in 2019, then slightly increasing to 27.2% in 2020. From 2020 onwards, ROE showed a strong upward trend, rising sharply to 35.93% in 2021 and reaching a notable 55.4% in 2022. This significant increase in ROE towards the end of the period aligns with improvements in net profit margin and a reduction in financial leverage, indicating enhanced shareholder value generation.

Five-Component Disaggregation of ROE

Builders FirstSource Inc., decomposition of ROE

Microsoft Excel
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Financial Leverage
Dec 31, 2022 = × × × ×
Dec 31, 2021 = × × × ×
Dec 31, 2020 = × × × ×
Dec 31, 2019 = × × × ×
Dec 31, 2018 = × × × ×

Based on: 10-K (reporting date: 2022-12-31), 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).

Tax Burden
The tax burden ratio remained stable over the five-year period, showing only a slight decrease from 0.79 in 2018 to 0.77 in 2020, and maintaining that level through 2022, indicating consistent tax efficiency.
Interest Burden
Interest burden displayed a notable improvement, increasing from 0.71 in 2018 to 0.95 in 2022. This trend suggests a reduction in interest expenses relative to earnings before interest and taxes, improving financial cost management.
EBIT Margin
EBIT margin demonstrated a significant upward trend, rising from 4.78% in 2018 to 16.59% in 2022. The most marked increase occurred between 2020 and 2022, reflecting enhanced operational profitability.
Asset Turnover
Asset turnover showed a declining trend from 2.63 in 2018 to 1.86 in 2021, before recovering slightly to 2.14 in 2022. This indicates a reduction in the efficiency of asset utilization until 2021, with some recuperation afterward.
Financial Leverage
Financial leverage steadily decreased from 4.92 in 2018 to 2.14 in 2022, suggesting a significant reduction in reliance on debt financing over the period and a strengthening of the equity base.
Return on Equity (ROE)
ROE revealed volatility but an overall upward trajectory, starting at 34.41% in 2018, dipping to the mid-20% range between 2019 and 2020, then climbing substantially to 55.4% by 2022. The increase in ROE is driven by improving profitability and lower financial leverage.

Two-Component Disaggregation of ROA

Builders FirstSource Inc., decomposition of ROA

Microsoft Excel
ROA = Net Profit Margin × Asset Turnover
Dec 31, 2022 = ×
Dec 31, 2021 = ×
Dec 31, 2020 = ×
Dec 31, 2019 = ×
Dec 31, 2018 = ×

Based on: 10-K (reporting date: 2022-12-31), 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).

Net Profit Margin
The net profit margin shows a consistent upward trend over the five-year period. Starting at 2.66% in 2018, it gradually increased each year, with a notable acceleration in growth occurring after 2020. By the end of 2022, the margin reached 12.1%, indicating a significant improvement in profitability and operational efficiency.
Asset Turnover
The asset turnover ratio demonstrates a declining trend from 2018 through 2021, decreasing from 2.63 to 1.86. This suggests a reduced efficiency in utilizing assets to generate revenue during these years. However, in 2022, there was a recovery with the ratio improving to 2.14, indicating a partial rebound in asset utilization effectiveness.
Return on Assets (ROA)
The return on assets experienced fluctuations initially but showed strong growth after 2020. It started at 7% in 2018, remained relatively stable through 2019 and 2020, then increased sharply in 2021 to 16.1%. This upward momentum continued in 2022, with ROA reaching 25.95%. This pattern reflects enhanced profitability relative to the company's asset base, corresponding with the improvements seen in net profit margin despite the prior dip in asset turnover.

Four-Component Disaggregation of ROA

Builders FirstSource Inc., decomposition of ROA

Microsoft Excel
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Dec 31, 2022 = × × ×
Dec 31, 2021 = × × ×
Dec 31, 2020 = × × ×
Dec 31, 2019 = × × ×
Dec 31, 2018 = × × ×

Based on: 10-K (reporting date: 2022-12-31), 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).

Tax Burden
The tax burden ratio remains relatively stable throughout the analyzed period, showing minimal fluctuation and holding steady around 0.77 to 0.79. This consistency suggests that the effective tax rate experienced only marginal changes, indicating stable tax-related obligations or benefits over these years.
Interest Burden
The interest burden ratio demonstrates a rising trend from 0.71 in 2018 to 0.95 in 2022. This gradual increase implies an improvement in the company’s ability to cover interest expenses from its operating income, suggesting reduced interest costs relative to earnings or increased operational performance before interest payments.
EBIT Margin
The EBIT margin shows a marked upward trajectory, starting from 4.78% in 2018 and increasing steadily to 16.59% by 2022. This significant improvement reflects enhanced operational efficiency and profitability, indicating better cost management or higher pricing power over time.
Asset Turnover
Asset turnover declines progressively from 2.63 in 2018 to a low of 1.86 in 2021, before rebounding to 2.14 in 2022. The initial decline signals a decreasing efficiency in generating sales from assets, whereas the partial recovery in 2022 may suggest steps towards better asset utilization or changes in sales volume or asset base.
Return on Assets (ROA)
Return on assets exhibits a significant upward movement, increasing from 7.00% in 2018 to 25.95% in 2022. This sharp rise indicates improved profitability relative to the asset base, likely driven by the combined effects of increasing EBIT margins and recovering asset turnover, highlighting a stronger ability to generate earnings from assets over the period.

Disaggregation of Net Profit Margin

Builders FirstSource Inc., decomposition of net profit margin ratio

Microsoft Excel
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Dec 31, 2022 = × ×
Dec 31, 2021 = × ×
Dec 31, 2020 = × ×
Dec 31, 2019 = × ×
Dec 31, 2018 = × ×

Based on: 10-K (reporting date: 2022-12-31), 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).

Tax Burden
The tax burden ratio remained relatively stable over the five-year period, showing a slight decrease from 0.79 in 2018 to 0.77 in 2020 and maintaining this level through 2022. This indicates consistent effective tax rates with minimal fluctuations.
Interest Burden
The interest burden ratio displayed a gradual improvement from 0.71 in 2018 to 0.75 in 2020, followed by a pronounced increase reaching 0.94 in 2021 and slightly higher at 0.95 in 2022. This suggests a significant reduction in interest expenses relative to earnings before interest and taxes (EBIT) in the last two years, enhancing profitability.
EBIT Margin
The EBIT margin experienced steady growth from 4.78% in 2018 to 6.35% in 2020, followed by a marked increase to 12% in 2021 and further to 16.59% in 2022. This considerable upward trend reflects improved operational efficiency and stronger earnings from core business activities.
Net Profit Margin
The net profit margin showed consistent improvement throughout the period, rising from 2.66% in 2018 to 3.66% in 2020, then more sharply increasing to 8.67% in 2021 and 12.1% in 2022. This progression aligns closely with improvements in EBIT margin and reduced interest burden, indicating overall enhanced profitability and effective cost and tax management.