DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
Decomposing ROE involves expressing net income divided by shareholders’ equity as the product of component ratios.
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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Aggregate Accruals
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Two-Component Disaggregation of ROE
Cigna Group, decomposition of ROE
| ROE | = | ROA | × | Financial Leverage | |
|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | |||
| Dec 31, 2023 | = | × | |||
| Dec 31, 2022 | = | × | |||
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Return on Assets (ROA)
- The Return on Assets exhibited a fluctuating downward trend over the analyzed period. Starting at 5.44% in 2020, the ROA decreased significantly to 3.46% in 2021, followed by a partial recovery to 4.63% in 2022. However, the metric declined again to 3.38% in 2023 and further to 2.2% in 2024, indicating diminishing efficiency in asset utilization to generate profits.
- Financial Leverage
- Financial leverage showed an overall increasing pattern. It began at a ratio of 3.09 in 2020, experienced a slight increase to 3.29 in 2021, then marginally decreased to 3.21 in 2022. However, it rose again to 3.3 in 2023 and reached its highest level of 3.8 in 2024. This suggests a growing reliance on debt financing relative to equity, which can amplify both returns and risk.
- Return on Equity (ROE)
- Return on Equity followed a similar fluctuating decline, starting from 16.81% in 2020, decreasing to 11.39% in 2021. It then increased to 14.86% in 2022 before declining to 11.17% in 2023 and further to 8.37% in 2024. The decreasing trend in ROE, alongside increasing financial leverage, may indicate challenges in generating equity returns despite higher debt levels.
Three-Component Disaggregation of ROE
Cigna Group, decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Financial Leverage | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Net Profit Margin
- The net profit margin exhibits a declining trend over the observed period, falling from 5.31% in 2020 to 1.4% in 2024. Despite a slight recovery in 2022, the margin consistently decreases, indicating a reduction in profitability relative to revenue.
- Asset Turnover
- Asset turnover shows a generally positive and increasing trend, rising from 1.02 in 2020 to 1.58 in 2024. This suggests improved efficiency in using assets to generate sales, with the most notable increase occurring between 2023 and 2024.
- Financial Leverage
- Financial leverage remains relatively stable with minor fluctuations between 3.09 and 3.8 over the five-year period. A moderate increase in leverage is observed in the final year, indicating a slight rise in the use of debt financing.
- Return on Equity (ROE)
- Return on equity trends downward from 16.81% in 2020 to 8.37% in 2024, reflecting diminishing returns for shareholders. After a decrease in 2021 and partial recovery in 2022, ROE declines again, showing overall weakening profitability relative to equity.
- Summary of Insights
- The data indicates a mixed performance with declining profitability metrics such as net profit margin and ROE, despite improved operational efficiency indicated by rising asset turnover. The slight increase in financial leverage suggests increased debt usage, which, coupled with reduced profitability, may signal heightened financial risk. The overall pattern points to challenges in maintaining profitable growth despite more efficient asset utilization.
Five-Component Disaggregation of ROE
Cigna Group, decomposition of ROE
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Tax Burden
- The tax burden ratio shows a varied trend over the five-year period. Beginning at 0.78 in 2020, it increased gradually to a peak of 0.97 in 2023 before declining sharply to 0.7 in 2024. This pattern indicates fluctuating effective tax rates impacting net profitability.
- Interest Burden
- The interest burden ratio declined steadily from 0.89 in 2020 to 0.77 in 2024. This suggests an improvement in operating income before interest and taxes relative to earnings before taxes, implying reduced interest expenses or improved operational efficiency in managing debt costs.
- EBIT Margin
- The EBIT margin experienced a consistent downward trend over the period. Starting at 7.69% in 2020, it decreased substantially to 2.61% by 2024. This decline indicates diminishing operational profitability and potentially increasing costs or pricing pressures affecting earnings before interest and taxes.
- Asset Turnover
- The asset turnover ratio increased steadily from 1.02 in 2020 to 1.58 in 2024, reflecting improved efficiency in using assets to generate revenue. This upward trend suggests better asset utilization or higher sales volume relative to the asset base.
- Financial Leverage
- Financial leverage showed an overall increase from 3.09 in 2020 to 3.8 in 2024, with minor fluctuations. This indicates a growing reliance on debt financing relative to equity, which could raise financial risk but also amplify returns if managed prudently.
- Return on Equity (ROE)
- ROE demonstrated a general decline from 16.81% in 2020 to 8.37% in 2024, with some recovery in 2022. The decreasing trend suggests that the company’s ability to generate profit from shareholder equity weakened over time, despite increased asset turnover and leverage. The reduction in EBIT margin and fluctuations in tax burden likely contributed to this decline.
Two-Component Disaggregation of ROA
Cigna Group, decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | |||
| Dec 31, 2023 | = | × | |||
| Dec 31, 2022 | = | × | |||
| Dec 31, 2021 | = | × | |||
| Dec 31, 2020 | = | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Net Profit Margin
- The net profit margin demonstrates a declining trend over the five-year period. Starting at 5.31% in 2020, it decreased significantly to 3.11% in 2021. Although a slight recovery to 3.72% is observed in 2022, the margin continued to decline in subsequent years, reaching 1.40% by 2024. This downward trajectory indicates decreasing profitability relative to revenues.
- Asset Turnover
- Asset turnover exhibits a consistent upward trend, increasing from 1.02 in 2020 to 1.58 in 2024. This improvement suggests enhanced efficiency in utilizing assets to generate sales, with the ratio improving steadily each year and a more pronounced increase observed in the final year.
- Return on Assets (ROA)
- Return on assets follows a pattern similar to net profit margin, with an overall decline from 5.44% in 2020 to 2.20% in 2024. A notable drop occurred from 2020 to 2021, followed by a partial rebound in 2022. However, the downward trend resumed thereafter, indicating diminishing effectiveness in generating profit from total assets.
Four-Component Disaggregation of ROA
Cigna Group, decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | × | |||||
| Dec 31, 2023 | = | × | × | × | |||||
| Dec 31, 2022 | = | × | × | × | |||||
| Dec 31, 2021 | = | × | × | × | |||||
| Dec 31, 2020 | = | × | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Tax Burden Ratio
- The tax burden displayed a generally stable trend from 2020 to 2022, increasing slightly from 0.78 to 0.81. A significant rise occurred in 2023, reaching 0.97, before declining sharply to 0.7 in 2024. This pattern indicates fluctuating effective tax rates impacting net income retention after taxes.
- Interest Burden Ratio
- There was a gradual decline in the interest burden ratio over the analyzed period, starting at 0.89 in 2020 and decreasing consistently to 0.77 by 2024. This suggests an incremental reduction in interest expenses relative to earnings before interest and taxes, improving the company's interest cost efficiency.
- EBIT Margin
- The EBIT margin showed a downward trend throughout the period. Beginning at 7.69% in 2020, it declined sharply to 4.66% in 2021. A minor recovery occurred in 2022 at 5.34%, followed by continued decreases to 3.45% in 2023 and 2.61% in 2024. This indicates diminishing operating profitability and potential pressure on controlling operating costs or generating sufficient operating revenue.
- Asset Turnover Ratio
- The asset turnover ratio improved steadily over the five years, rising from 1.02 in 2020 to 1.58 in 2024. This demonstrates increased efficiency in utilizing assets to generate revenue, showing positive operational leverage and asset management practices.
- Return on Assets (ROA)
- The ROA indicates a fluctuating but overall downward pattern. After a decrease from 5.44% in 2020 to 3.46% in 2021, it partially recovered to 4.63% in 2022. However, the ratio declined again to 3.38% in 2023 and further to 2.2% in 2024. This declining profitability metric, despite improved asset turnover, likely reflects the combined impact of reducing EBIT margin and varying tax and interest burdens on net income generation relative to total assets.
Disaggregation of Net Profit Margin
Cigna Group, decomposition of net profit margin ratio
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Tax Burden
- The tax burden ratio exhibits variability across the analyzed periods. It increased from 0.78 in 2020 to a peak of 0.97 in 2023, before declining to 0.7 in 2024. This suggests fluctuating tax efficiency or changes in tax policies affecting the entity's profit retention after taxes.
- Interest Burden
- The interest burden ratio shows a general downward trend over the five years. Starting at 0.89 in 2020, it gradually decreased to 0.77 by 2024. This indicates a slight improvement in managing interest expenses relative to operating income, potentially reflecting a reduction in debt levels or lower interest costs.
- EBIT Margin
- The EBIT margin consistently declined throughout the periods considered. From a peak of 7.69% in 2020, the margin dropped to 2.61% by 2024. This steady decline indicates decreasing operating profitability, possibly due to rising operating costs, competitive pressures, or other operational challenges.
- Net Profit Margin
- The net profit margin followed a similar downward trajectory as the EBIT margin. It decreased from 5.31% in 2020 to 1.4% in 2024. This represents a significant compression in overall profitability after all expenses, including taxes and interest, which suggests diminishing bottom-line performance.