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.
Two-Component Disaggregation of ROE
Constellation Brands Inc., decomposition of ROE
Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).
- Return on Assets (ROA)
- The Return on Assets (ROA) demonstrates an upward trend from 8.25% in 2017 to a peak of 11.75% in 2019, indicating improved efficiency in asset utilization during this period. However, this was followed by a sharp decline to -0.04% in 2020, signifying a significant downturn. The ROA partially recovered to 7.37% in 2021 but declined again to a negative value of -0.16% in 2022, suggesting fluctuating operational performance and challenges in maintaining consistent asset profitability in the most recent years.
- Financial Leverage
- The financial leverage ratio shows a steady decrease from 2.7 in 2017 to 1.99 in 2021, indicating a progressive reduction in the company's use of debt relative to its equity, which may reflect a more conservative capital structure. However, there is a slight increase observed in 2022 to 2.2, which could indicate a modest increase in debt financing or changes in equity levels that might warrant further analysis.
- Return on Equity (ROE)
- The Return on Equity (ROE) trends similarly to ROA, with an increase from 22.28% in 2017 to a high of 28.82% in 2018, followed by a moderate decline to 27.38% in 2019. In 2020, ROE dropped sharply to -0.10%, signaling a substantial reduction in shareholders’ returns. Although ROE improved to 14.69% in 2021, it again turned negative at -0.34% in 2022. These fluctuations suggest volatility in profitability from the shareholders’ perspective, possibly affected by earnings variability, leverage changes, or other operational factors.
Three-Component Disaggregation of ROE
Constellation Brands Inc., decomposition of ROE
Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).
- Net Profit Margin
- The net profit margin experienced a notable increase from 20.94% in 2017 to a peak of 42.33% in 2019. This was followed by a sharp decline to -0.14% in 2020, indicating a loss. The margin recovered to 23.19% in 2021 but again turned negative to -0.46% in 2022, suggesting volatility and challenges in maintaining profitability consistently.
- Asset Turnover
- Asset turnover showed a gradual decline from 0.39 in 2017 to 0.28 in 2019, reflecting reduced efficiency in generating revenue from assets. However, from 2020 onwards, the ratio improved slightly each year, rising to 0.34 by 2022, signaling a modest recovery in asset utilization efficiency.
- Financial Leverage
- Financial leverage steadily decreased over the observed period, falling from 2.7 in 2017 to a low of 1.99 in 2021. This trend indicates a reduction in the reliance on debt or borrowed funds relative to equity. A slight increase to 2.2 in 2022 partially reversed this trend, but overall leverage remained lower than at the start of the period.
- Return on Equity (ROE)
- ROE closely mirrored the trend in net profit margin. It rose from 22.28% in 2017 to a high of 28.82% in 2018, then declined to 27.38% in 2019. A significant drop occurred in 2020, with ROE turning negative at -0.1%, followed by a partial recovery to 14.69% in 2021 and a subsequent decline to -0.34% in 2022. The fluctuations reflect the company’s variable profitability and the impact of lower net income on shareholder returns.
- Summary
- Overall, the data indicates a period of strong profitability until 2019, followed by significant volatility and periods of losses in 2020 and 2022. Asset efficiency declined initially but showed signs of improvement toward the end of the period. Financial leverage decreased consistently, suggesting a more conservative capital structure, though this trend slightly reversed most recently. The combined trends in profitability and efficiency metrics suggest challenges in sustaining performance in recent years.
Five-Component Disaggregation of ROE
Constellation Brands Inc., decomposition of ROE
Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).
- Tax Burden
- The Tax Burden ratio exhibited significant volatility over the observed period. It started at 0.73 in 2017, rose sharply to 0.99 in 2018, experienced a decline to 0.83 in 2019, then was missing in 2020. It slightly decreased to 0.8 in 2021, before turning negative to -0.15 in 2022, indicating an unusual tax impact or possible tax credits affecting net income adversely in the most recent year.
- Interest Burden
- The Interest Burden ratio showed a generally stable trend initially, with a minor increase from 0.86 in 2017 to 0.92 in 2019. After the gap in 2020, it decreased to 0.87 in 2021 and then dropped substantially to 0.43 in 2022, suggesting a significant rise in interest expenses relative to earnings before interest and taxes during that year.
- EBIT Margin
- The EBIT Margin displayed notable fluctuations. It started at 33.04% in 2017 and improved to 35.11% in 2018, followed by a marked increase to 55.31% in 2019. However, there was a dramatic decline to -6.59% in 2020, indicating negative operating profitability. The margin recovered to 33.6% in 2021 but fell again to 7.09% in 2022, reflecting operational challenges and volatility in earnings before interest and taxes.
- Asset Turnover
- Asset Turnover showed a downward trend from 0.39 in 2017 to 0.28 in 2019, implying decreasing efficiency in using assets to generate sales. After reaching its lowest point in 2019, it slightly recovered to 0.31 in 2020 and continued modestly improving to 0.34 by 2022, indicating a gradual enhancement in asset utilization.
- Financial Leverage
- Financial Leverage demonstrated a consistent declining trend from 2.7 in 2017 to 1.99 in 2021, suggesting a reduction in debt usage or overall leverage. However, there was a slight increase to 2.2 in 2022, indicating a small reversal in the leverage reduction trend.
- Return on Equity (ROE)
- ROE followed a volatile pattern during the period. It increased from 22.28% in 2017 to a peak of 28.82% in 2018, before slightly declining to 27.38% in 2019. The company experienced a collapse to near zero (-0.1%) in 2020, followed by a partial recovery to 14.69% in 2021, then returned to a negative value of -0.34% in 2022. This suggests fluctuations in profitability and challenges in generating shareholder returns in recent years.
Two-Component Disaggregation of ROA
Constellation Brands Inc., decomposition of ROA
Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).
- Net Profit Margin
- The net profit margin displayed notable fluctuations over the six-year period. Initially, there was a general upward trend from 20.94% in 2017 to a peak of 42.33% in 2019, indicating improved profitability. However, this was followed by a sharp decline to a slightly negative value of -0.14% in 2020. After partially recovering to 23.19% in 2021, the margin again turned negative to -0.46% by 2022. These variations suggest considerable volatility in profitability, with significant setbacks in the most recent years.
- Asset Turnover
- Asset turnover demonstrated a downward trend from 0.39 in 2017 to 0.28 in 2019, implying decreasing efficiency in utilizing assets to generate revenue. From 2019 onward, asset turnover showed a gradual recovery, increasing steadily to 0.34 by 2022. Despite this improvement, the ratio remained below the initial level observed at the start of the period.
- Return on Assets (ROA)
- The return on assets followed a pattern similar to the net profit margin. ROA improved from 8.25% in 2017 to a high of 11.75% in 2019, reflecting strong asset profitability. Nevertheless, it experienced a drastic decline to nearly zero (-0.04%) in 2020, followed by a rebound to 7.37% in 2021. The figure again dropped below zero to -0.16% in 2022, indicating recent losses in asset-based returns. This volatility aligns with the variations seen in net profit margin, underscoring challenges in maintaining consistent asset profitability.
Four-Component Disaggregation of ROA
Constellation Brands Inc., decomposition of ROA
Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).
- Tax Burden
- The tax burden ratio displays variability over the periods analyzed. It starts at 0.73 in 2017, peaks at 0.99 in 2018, and then generally declines to 0.8 by 2021. A notable anomaly occurs in 2022, with a negative value of -0.15, indicating an unusual tax effect or potential tax benefit impacting the financial results.
- Interest Burden
- The interest burden ratio remains relatively stable from 2017 through 2021, fluctuating within a narrow range from 0.86 to 0.92. However, there is a significant drop to 0.43 in 2022, suggesting increased interest expenses or reduced earnings before interest and taxes, which negatively impacts profitability before tax.
- EBIT Margin
- The EBIT margin shows strong performance from 2017 through 2019, with a peak of 55.31% in 2019. This is followed by a dramatic decline to a negative margin of -6.59% in 2020, likely reflecting operational challenges or extraordinary costs during that period. The margin recovers to 33.6% in 2021 but decreases significantly again to 7.09% in 2022, indicating ongoing volatility in operating profitability.
- Asset Turnover
- Asset turnover demonstrates a gradual decline from 0.39 in 2017 to a low of 0.28 in 2019, suggesting decreased efficiency in using assets to generate revenue. After 2019, there is a modest recovery trend, with ratios improving to 0.34 by 2022, indicating some improvement in asset utilization.
- Return on Assets (ROA)
- ROA follows a pattern closely related to EBIT margin and asset turnover. It increased from 8.25% in 2017 to a peak of 11.75% in 2019, declined sharply to -0.04% in 2020, then partially rebounded to 7.37% in 2021. In 2022, ROA turns negative again at -0.16%, signaling challenges in generating profit from assets in recent periods.
Disaggregation of Net Profit Margin
Constellation Brands Inc., decomposition of net profit margin ratio
Based on: 10-K (reporting date: 2022-02-28), 10-K (reporting date: 2021-02-28), 10-K (reporting date: 2020-02-29), 10-K (reporting date: 2019-02-28), 10-K (reporting date: 2018-02-28), 10-K (reporting date: 2017-02-28).
- Tax Burden
- The tax burden ratio exhibited fluctuations over the analyzed periods. It was relatively stable around 0.73 to 0.99 in the initial years and dropped to 0.83 in 2019. Data for 2020 is missing, but by 2021 the ratio was at 0.8, followed by a sharp decline to a negative value of -0.15 in 2022, indicating a significant change in tax expenses or benefits during the latest period.
- Interest Burden
- The interest burden ratio showed a moderate upward trend from 0.86 in 2017 to 0.92 in 2019, suggesting a slight improvement in earnings before interest and tax relative to earnings before tax. After missing data in 2020, the ratio decreased to 0.87 in 2021 and sharply declined further to 0.43 by 2022, signaling increased interest expenses or other factors impacting earnings before tax.
- EBIT Margin
- The EBIT margin percentage generally increased from 33.04% in 2017 to a peak of 55.31% in 2019, demonstrating strong operational profitability. However, there was a substantial drop to -6.59% in 2020, indicating operational losses. The margin recovered to 33.6% in 2021 but declined again to 7.09% in 2022, reflecting considerable volatility and operational challenges in recent years.
- Net Profit Margin
- The net profit margin followed a positive trend from 20.94% in 2017 ascending to 42.33% in 2019, indicating increasing profitability. A sharp decline occurred in 2020 with the margin near zero at -0.14%, demonstrating minimal net profit or slight loss. An improvement was noted in 2021 with a margin of 23.19%, but it reverted to a negative value of -0.46% in 2022, suggesting renewed net losses.