Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Analysis of Revenues
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Profitability Ratios (Summary)
Builders FirstSource Inc., profitability ratios
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).
- Gross Profit Margin
- The gross profit margin demonstrated a generally positive trend over the five-year period. Starting at 24.89% in 2018, it increased slightly to 27.15% in 2019, then experienced a minor dip to 25.97% in 2020. From 2020 onward, the margin showed consistent improvement, reaching 29.41% in 2021 and further rising to 34.08% by 2022. This upward trajectory suggests enhanced effectiveness in managing production and direct costs relative to revenue.
- Operating Profit Margin
- This margin exhibited a steady increase throughout the period. Beginning at a modest 4.78% in 2018, it rose to 5.39% in 2019 and further improved to 6.35% in 2020. The increase accelerated significantly in the subsequent years, with the margin almost doubling to 12% in 2021 and again increasing to 16.59% in 2022. The continuous growth indicates improved operational efficiency and cost control measures.
- Net Profit Margin
- The net profit margin followed a similar pattern to the operating margin, starting from a low 2.66% in 2018 and gradually increasing to 3.05% in 2019 and 3.66% in 2020. In 2021, a notable rise occurred, reaching 8.67%, and the margin continued its upward trend, achieving 12.1% in 2022. This increase reflects not only operational gains but also better management of non-operating expenses and taxes, leading to enhanced overall profitability.
- Return on Equity (ROE)
- ROE exhibited considerable variability but generally showed positive momentum. It started high at 34.41% in 2018 and declined to 26.89% in 2019. It then stabilized slightly to 27.2% in 2020 before experiencing a significant increase to 35.93% in 2021, followed by a sharp rise to 55.4% in 2022. The marked improvements in the final two years suggest more effective use of shareholders' equity to generate profits, possibly due to improved net margins and asset utilization.
- Return on Assets (ROA)
- ROA displayed a relatively stable to improving trend. The value was 7% in 2018 and remained nearly unchanged at 6.83% in 2019. A slight increase occurred in 2020, reaching 7.51%. However, a significant turnaround is visible starting in 2021, with ROA more than doubling to 16.1% and climbing further to 25.95% in 2022. This pattern indicates enhanced efficiency in utilizing assets to produce net income, aligning with the rise in profitability metrics across the same period.
Return on Sales
Return on Investment
Gross Profit Margin
Builders FirstSource Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Gross margin | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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).
1 2022 Calculation
Gross profit margin = 100 × Gross margin ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Sales Trend
- Net sales demonstrated a consistent upward trajectory over the analyzed period. Starting at approximately 7.7 billion USD at the end of 2018, sales slightly dipped in 2019 but subsequently increased significantly through 2020 to 2022, peaking at around 22.7 billion USD in 2022. This represents nearly a threefold increase from 2018 to 2022, indicating substantial growth in revenue generation.
- Gross Margin Analysis
- Gross margin amounts moved in tandem with net sales, rising steadily from about 1.9 billion USD in 2018 to approximately 7.7 billion USD in 2022. The notable jump occurred between 2020 and 2021, where gross margin more than doubled. This increase is consistent with growth in net sales but also suggests improvements in cost management or pricing strategy.
- Gross Profit Margin Percentage
- The gross profit margin percentage showed a positive trend, improving from 24.89% in 2018 to 34.08% in 2022. After a slight dip in 2020, the margin rebounded strongly in 2021 and continued to rise in 2022. The climb in margin percentage indicates enhanced profitability at the gross level, reflecting either increased pricing power, better operational efficiencies, or a combination of both.
- Overall Insights
- The data points to a company experiencing robust growth in sales and profitability over the five-year span. The significant increases in both gross margin and gross profit margin percentage during 2021 and 2022 imply effective strategies leading to higher profit conversion relative to sales. This could be attributable to market expansion, cost controls, or operational improvements. The positive trends suggest a strengthening financial position in the recent years covered.
Operating Profit Margin
Builders FirstSource Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Income from operations | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Operating Profit Margin, Sector | ||||||
| Capital Goods | ||||||
| Operating Profit Margin, Industry | ||||||
| Industrials | ||||||
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).
1 2022 Calculation
Operating profit margin = 100 × Income from operations ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Income from operations
- There is a marked upward trend in income from operations over the five-year period. The value increased modestly from 368,968 thousand USD in 2018 to 543,854 thousand USD in 2020. Notably, there was a significant surge in 2021 reaching 2,387,424 thousand USD, followed by further growth to 3,770,206 thousand USD in 2022. This indicates substantial operational growth particularly in the last two years.
- Net sales
- Net sales exhibited a fluctuating trend initially, decreasing from 7,724,771 thousand USD in 2018 to 7,280,431 thousand USD in 2019, before increasing again to 8,558,874 thousand USD in 2020. From 2020 onwards, there was a strong upward trend with net sales more than doubling in 2021 to 19,893,856 thousand USD and continuing to increase to 22,726,418 thousand USD in 2022. This demonstrates significant top-line growth particularly in the most recent two years.
- Operating profit margin
- The operating profit margin showed consistent improvement throughout the period. Starting at 4.78% in 2018, the margin gradually increased each year, reaching 6.35% in 2020. A sharp increase occurred in 2021, with the margin rising to 12%, and continued improvement in 2022 to 16.59%. This improvement suggests enhanced operational efficiency and profitability over time.
Net Profit Margin
Builders FirstSource Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Profit Margin, Sector | ||||||
| Capital Goods | ||||||
| Net Profit Margin, Industry | ||||||
| Industrials | ||||||
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).
1 2022 Calculation
Net profit margin = 100 × Net income ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income
- The net income demonstrates a notable upward trajectory over the five-year period. Starting at approximately $205 million in 2018, it rises modestly to around $222 million in 2019, then increases more substantially to about $314 million in 2020. A significant surge is observed in 2021, with net income exceeding $1.7 billion, followed by further growth to nearly $2.75 billion in 2022. This indicates an overall strong improvement in profitability.
- Net Sales
- Net sales show a generally increasing trend with some variability. The figure begins near $7.7 billion in 2018, slightly decreases to approximately $7.3 billion in 2019, then rebounds to around $8.6 billion in 2020. A marked jump occurs in 2021, where sales more than double to nearly $19.9 billion, continuing to grow to about $22.7 billion in 2022. This pattern suggests expansion in revenue, particularly pronounced from 2020 onward.
- Net Profit Margin
- The net profit margin exhibits consistent improvement across the timeframe. Beginning at a modest 2.66% in 2018, it gradually increases to 3.05% and 3.66% in 2019 and 2020, respectively. A more dramatic rise is seen in 2021, with the margin reaching 8.67%, followed by further enhancement to 12.1% in 2022. This reflects enhanced operational efficiency or improved cost management contributing to higher profitability relative to sales.
- Overall Analysis
- The financial data indicates a strong positive trend in performance over the five years. Both revenue and net income exhibit substantial growth, especially from 2020 onward, with net income's growth rate outpacing that of sales. The accelerating net profit margin supports the conclusion that profitability improvements are driven not only by increased revenues but also by improved margins. This may imply effective scaling, better pricing power, or cost control measures contributing to enhanced financial health.
Return on Equity (ROE)
Builders FirstSource Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Stockholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| ROE, Sector | ||||||
| Capital Goods | ||||||
| ROE, Industry | ||||||
| Industrials | ||||||
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).
1 2022 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data reveals a marked upward trajectory in key performance metrics over the five-year period ending in 2022. Net income has shown substantial growth, increasing from $205.2 million in 2018 to approximately $2.75 billion in 2022. This represents a more than thirteenfold rise, with the most pronounced jump occurring between 2020 and 2021, where net income increased by over five times from $313.5 million to $1.7 billion.
Stockholders’ equity also exhibits a consistent and significant increase from $596.3 million in 2018 to nearly $5 billion in 2022. The largest increase occurs between 2020 and 2021, where equity jumps from approximately $1.15 billion to around $4.8 billion, indicating substantial capital accumulation or retained earnings growth during this period.
The Return on Equity (ROE) percentage, a measure of profitability relative to shareholders’ equity, shows some variability but generally trends upward. Starting at 34.41% in 2018, it dipped slightly to 26.89% in 2019 and remained relatively stable through 2020 at 27.2%. However, from 2020 onward, ROE increased markedly, reaching 35.93% in 2021 and peaking at 55.4% in 2022. This suggests an improving efficiency in generating profit from equity invested, especially notable in the last two years.
In summary, the data indicates robust growth in net income and equity over the period, coupled with improving returns on equity, especially after 2020. The significant increases between 2020 and 2022 suggest a period of accelerated expansion and enhanced profitability efficiency.
Return on Assets (ROA)
Builders FirstSource Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| ROA, Sector | ||||||
| Capital Goods | ||||||
| ROA, Industry | ||||||
| Industrials | ||||||
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).
1 2022 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income
- The net income shows a significant upward trend over the period analyzed. Starting at approximately 205 million USD in 2018, there is a steady increase through 2019 and 2020, followed by a sharp rise in 2021. The peak is observed in 2022 with a net income of about 2.75 billion USD, indicating substantial profitability growth.
- Total Assets
- Total assets grew moderately from 2018 to 2020, with figures rising from roughly 2.93 billion USD to over 4.17 billion USD. A marked increase occurred in 2021, where assets more than doubled to approximately 10.7 billion USD. In 2022, assets remain relatively stable compared to 2021, showing a slight decrease to about 10.6 billion USD.
- Return on Assets (ROA)
- The return on assets remained relatively stable around 7% during 2018 to 2020. However, the metric experienced a notable jump to 16.1% in 2021 and further improved to nearly 26% in 2022. This indicates a significant enhancement in asset efficiency and profitability over the latter years.
- Summary
- The financial data reveals robust growth in both profitability and asset utilization efficiency starting from 2021. While total assets surged considerably in 2021 and then stabilized, net income and ROA continued to increase sharply through 2022. This suggests improved operational performance and better capital management, contributing to higher returns relative to asset base.