Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Return on Sales
Return on Investment
Colgate-Palmolive Co., 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).
Analysis of profitability ratios from 2018 to 2022 indicates a general deterioration in margin performance and asset efficiency, with a noticeable acceleration in decline during the final two years of the period.
- Profit Margins
- Gross profit margin remained relatively stable between 59.39% and 60.82% from 2018 through 2021, before decreasing to 57.04% in 2022. A more pronounced contraction is evident in the operating and net profit margins. Operating margin fell from 23.76% in 2018 to 16.10% in 2022, while net profit margin declined from a peak of 16.36% in 2020 to 9.93% in 2022. The widening gap between gross and net margins suggests that operating expenses and other costs have increased disproportionately to revenue.
- Return on Assets (ROA)
- A consistent downward trajectory is observed in the return on assets, which decreased from 19.74% in 2018 to 11.35% in 2022. This trend reflects a diminishing capacity to generate earnings relative to the total asset base over the five-year period.
- Return on Equity (ROE)
- The return on equity exhibits extreme volatility and exceptionally high values, reaching a peak of 2,023.08% in 2019. While it corrected significantly in 2020, it remained elevated, fluctuating between 355.67% and 445.14% through 2022. These outlier figures typically suggest a highly leveraged capital structure or a significantly reduced equity base.
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Gross Profit Margin
Colgate-Palmolive Co., 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 millions) | ||||||
| Gross profit | 10,248) | 10,375) | 10,017) | 9,325) | 9,231) | |
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Profitability Ratio | ||||||
| Gross profit margin1 | 57.04% | 59.55% | 60.82% | 59.42% | 59.39% | |
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Procter & Gamble Co. | 47.43% | 51.25% | — | — | — | |
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 profit ÷ Net sales
= 100 × 10,248 ÷ 17,967 = 57.04%
2 Click competitor name to see calculations.
The financial trajectory between 2018 and 2022 indicates a period of consistent top-line growth contrasted by a declining ability to maintain gross margins in the final two years of the period. While net sales increased steadily, the gross profit margin exhibited volatility, peaking in 2020 before entering a notable downward trend.
- Net Sales Trends
- A continuous upward trajectory in net sales is observed, rising from 15,544 million US$ in 2018 to 17,967 million US$ in 2022. This represents a steady expansion in revenue generation throughout the five-year duration.
- Gross Profit Performance
- Gross profit grew from 9,231 million US$ in 2018 to a peak of 10,375 million US$ in 2021. However, 2022 marked a reversal in this trend, as gross profit decreased to 10,248 million US$ despite the continued growth in net sales.
- Gross Profit Margin Analysis
- The gross profit margin remained relatively stable between 2018 and 2019, followed by an increase to a peak of 60.82% in 2020. A contraction began in 2021 at 59.55% and accelerated in 2022, falling to 57.04%. This decline suggests that the cost of goods sold increased at a faster rate than net sales, thereby compressing the margin.
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Operating Profit Margin
Colgate-Palmolive Co., 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 millions) | ||||||
| Operating profit | 2,893) | 3,332) | 3,885) | 3,554) | 3,694) | |
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Profitability Ratio | ||||||
| Operating profit margin1 | 16.10% | 19.13% | 23.59% | 22.65% | 23.76% | |
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Procter & Gamble Co. | 22.21% | 23.63% | — | — | — | |
| Operating Profit Margin, Industry | ||||||
| Consumer Staples | 8.44% | 8.48% | — | — | — | |
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 × Operating profit ÷ Net sales
= 100 × 2,893 ÷ 17,967 = 16.10%
2 Click competitor name to see calculations.
An analysis of the financial performance between 2018 and 2022 reveals a divergence between top-line revenue growth and operational profitability.
- Net Sales Growth
- Net sales exhibited a consistent upward trend throughout the period, rising from US$ 15,544 million in 2018 to US$ 17,967 million in 2022. This represents a steady increase in revenue generation over the five-year span.
- Operating Profit Volatility
- Operating profit did not mirror the steady growth of sales. After peaking at US$ 3,885 million in 2020, operating profit experienced a significant decline, falling to US$ 3,332 million in 2021 and further decreasing to US$ 2,893 million by 2022.
- Operating Profit Margin Compression
- The operating profit margin remained relatively stable from 2018 to 2020, oscillating between 22.65% and 23.76%. However, a sharp contraction is observed starting in 2021, where the margin dropped to 19.13%, continuing its decline to 16.10% in 2022.
The data indicates that while the company successfully expanded its net sales, the cost of operations grew at a disproportionately higher rate during the final two years of the period. This resulted in a substantial erosion of the operating profit margin, suggesting a decrease in operational efficiency or an increase in input costs that were not fully offset by revenue growth.
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Net Profit Margin
Colgate-Palmolive Co., 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 millions) | ||||||
| Net income attributable to Colgate-Palmolive Company | 1,785) | 2,166) | 2,695) | 2,367) | 2,400) | |
| Net sales | 17,967) | 17,421) | 16,471) | 15,693) | 15,544) | |
| Profitability Ratio | ||||||
| Net profit margin1 | 9.93% | 12.43% | 16.36% | 15.08% | 15.44% | |
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Procter & Gamble Co. | 18.38% | 18.79% | — | — | — | |
| Net Profit Margin, Industry | ||||||
| Consumer Staples | 6.11% | 6.21% | — | — | — | |
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 attributable to Colgate-Palmolive Company ÷ Net sales
= 100 × 1,785 ÷ 17,967 = 9.93%
2 Click competitor name to see calculations.
The financial performance between 2018 and 2022 exhibits a divergence between top-line revenue growth and bottom-line profitability. While net sales increased consistently over the five-year period, net income and the net profit margin experienced a significant downturn following a peak in 2020.
- Net Sales Trend
- A steady upward trajectory in net sales is observed, rising from US$ 15,544 million in 2018 to US$ 17,967 million in 2022. This indicates a consistent expansion in market reach or pricing power over the analyzed period.
- Net Income Fluctuations
- Net income demonstrated volatility, reaching a peak of US$ 2,695 million in 2020 before entering a period of decline. By December 31, 2022, net income fell to US$ 1,785 million, marking a substantial decrease from the 2020 high.
- Net Profit Margin Compression
- The net profit margin remained relatively stable between 2018 and 2020, peaking at 16.36%. However, a sharp contraction occurred in the subsequent two years, with the margin falling to 12.43% in 2021 and further declining to 9.93% in 2022.
The data indicates a negative correlation between sales growth and profitability in the latter half of the period. The erosion of the net profit margin from 16.36% to 9.93% suggests that operating expenses, cost of goods sold, or other non-operating costs increased at a rate that significantly outpaced the growth in net sales.
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Return on Equity (ROE)
Colgate-Palmolive Co., 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 millions) | ||||||
| Net income attributable to Colgate-Palmolive Company | 1,785) | 2,166) | 2,695) | 2,367) | 2,400) | |
| Total Colgate-Palmolive Company shareholders’ equity | 401) | 609) | 743) | 117) | (102) | |
| Profitability Ratio | ||||||
| ROE1 | 445.14% | 355.67% | 362.72% | 2,023.08% | — | |
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Procter & Gamble Co. | 31.64% | 30.85% | — | — | — | |
| ROE, Industry | ||||||
| Consumer Staples | 32.10% | 31.40% | — | — | — | |
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 attributable to Colgate-Palmolive Company ÷ Total Colgate-Palmolive Company shareholders’ equity
= 100 × 1,785 ÷ 401 = 445.14%
2 Click competitor name to see calculations.
The financial performance from 2018 to 2022 is characterized by a significant divergence between net income and shareholders' equity, resulting in atypical return on equity (ROE) metrics. While net income remained substantial throughout the period, the equity base remained relatively small and volatile, which skewed the resulting profitability ratios.
- Net Income Analysis
- Net income exhibited a fluctuating trend, peaking at 2,695 million USD in 2020. Following this peak, a consistent decline is observed, with values falling to 2,166 million USD in 2021 and further decreasing to 1,785 million USD by December 31, 2022. This represents a contraction in absolute profitability during the latter two years of the analyzed period.
- Shareholders' Equity Trends
- The equity position showed extreme volatility, beginning with a negative balance of 102 million USD in 2018. A recovery occurred between 2019 and 2020, where equity reached a maximum of 743 million USD. However, a downward trend followed, with equity declining to 401 million USD by 2022, indicating a reduction in the company's book value.
- Return on Equity (ROE) Interpretation
- ROE figures are exceptionally elevated, ranging from 355.67% to 2,023.08%. These results are not indicative of standard operational efficiency but are rather a mathematical consequence of a very low equity denominator relative to net income. The extreme peak in 2019 occurred as the equity base transitioned from a negative to a small positive value. The increase in ROE to 445.14% in 2022 is attributed to the equity base contracting at a faster rate than the decline in net income.
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Return on Assets (ROA)
Colgate-Palmolive Co., 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 millions) | ||||||
| Net income attributable to Colgate-Palmolive Company | 1,785) | 2,166) | 2,695) | 2,367) | 2,400) | |
| Total assets | 15,731) | 15,040) | 15,920) | 15,034) | 12,161) | |
| Profitability Ratio | ||||||
| ROA1 | 11.35% | 14.40% | 16.93% | 15.74% | 19.74% | |
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Procter & Gamble Co. | 12.58% | 11.99% | — | — | — | |
| ROA, Industry | ||||||
| Consumer Staples | 8.95% | 8.75% | — | — | — | |
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 attributable to Colgate-Palmolive Company ÷ Total assets
= 100 × 1,785 ÷ 15,731 = 11.35%
2 Click competitor name to see calculations.
The analysis of profitability ratios between 2018 and 2022 reveals a general decline in asset efficiency. The Return on Assets (ROA) experienced a downward trajectory, falling from 19.74% in 2018 to 11.35% in 2022.
- Net Income Trends
- Net income exhibited volatility over the period, peaking in 2020 at 2,695 million USD. However, a notable contraction occurred in the subsequent two years, with income falling to 1,785 million USD by the end of 2022, representing a significant decrease from the 2020 peak.
- Asset Base Expansion
- Total assets increased substantially from 12,161 million USD in 2018 to a peak of 15,920 million USD in 2020. While there was a slight reduction in 2021, assets rose again to 15,731 million USD in 2022. This expansion of the asset base without a corresponding sustained increase in net income contributed to the compression of the ROA.
- ROA Performance and Correlation
- The ROA declined from 19.74% in 2018 to 15.74% in 2019, primarily driven by the rapid increase in total assets. A partial recovery was observed in 2020, where the ROA rose to 16.93% due to higher net income. From 2021 onward, a consistent decline was observed, reaching a period low of 11.35% in 2022. This trend indicates a diminishing ability to generate profit from the company's invested assets over the analyzed timeframe.
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